Fannie Mae and Freddie Mac reported somewhat underwhelming results for the fourth quarter, thanks to huge hits they took from hedging losses tied to their holdings of derivatives. The reduced earnings highlighted the fact that although the two have been cash cows for the U.S. Treasury over the past two years, they aren’t bullet proof. During separate press briefings with the media, the CEOs of both firms spent a bit of time going over the hits they took on their derivatives, stressing that the interest rate swaps they use to hedge rate swings are essential and cut both ways. The message was clear: if mortgage rates had not fallen dramatically in December, their earnings would have been ... [with one exclusive chart] ...

Fannie Mae and Freddie Mac employment numbers were relatively steady in the past year while expenses increased, according to a new analysis by Inside The GSEs. While staffing at Freddie has remained relatively level since the end of 2008, Fannie Mae has significantly boosted its employee count. As of the end of January, Fannie had approximately 7,600 personnel, including full-time and part-time employees, term employees and employees on leave, according to the latest annual report from the GSE. The employee count increased by 2.7 percent compared with January 2014. Fannie spent $1.32 billion on salaries and employee benefits in 2014, up 8.5 percent compared with 2013. Freddie had 4,957 full-time employees and 50 part-time employees as of Feb. 5, down ...

With it looking more likely that the GSEs could survive in some form, a critic of Fannie Mae and Freddie Mac has proposed changes he suggests would address most of the flaws he sees in the companies. Mark Calabria, director of financial regulation studies at the Cato Institute, a libertarian think tank, said he offered the suggestions “in the spirit of lively debate.” He suggested that the federal government should open GSE charters to competition, allowing any firm that can meet the requirements to receive a GSE charter. Calabria said GSEs should have a capital requirement of at least 8.0 percent. Capital of 4.0 percent to 5.0 percent would have covered the losses Fannie and Freddie experienced in 2007, according ...

Remarks from the leadership of the GSEs and earnings-related disclosures suggest more sales of non-performing loans are in the cards this year. Freddie Mac is putting together its first NPL auction of 2015, CEO Don Layton said in a recent interview with IMFnews, an affiliated daily news service. Layton declined to provide any details, noting that the GSE has yet to make an official announcement on the coming sale. This past summer, Freddie sold $659 million of “deeply” delinquent loans from its investment portfolio. At the time, it marked a first for a GSE. Isaac Boltansky, an analyst at Compass Point Research & Trading, said, “GSE management’s commentary reinforces our view that the GSEs are moving slowly but surely towards ...

A series of court decisions have affirmed the supremacy of the executive branch of government in its regulation of Fannie Mae and Freddie Mac to the chagrin of private-equity investors seeking compensation in the wake of the financial crisis, according to a recent analysis by Kroll Bond Rating Agency. Those recent court decisions confirm the fact that the two GSEs are “instrumentalities of the federal government and not private corporations,” Kroll analysts said. “While this reality may bother some equity investors – and rightly so – this is good news for bond investors,” they noted. For equity investors, the court decisions underscore the fact that the GSEs are “creatures of Congress,” the analysts pointed out. In contrast, private corporations are governed by ...

The flow of refinance mortgages to Fannie Mae and Freddie Mac increased during the fourth quarter, but the two GSEs continued to see declining volume in the Home Affordable Refinance Program. According to figures from the Federal Housing Finance Agency, Fannie and Freddie securitized 432,376 refinance mortgages in the fourth quarter, up 11.1 percent from the previous period. Fannie had the bigger gain, 16.2 percent. But total HARP activity fell 15.3 percent from the third quarter, and for the year it was down 75.9 percent from 2013 levels. The biggest slowdown in HARP were mortgages with loan-to-value ratios exceeding 105 percent. Both GSEs are doing more non-HARP streamlined refi business than in the program set up in 2009 for underwater ... [with two exclusive charts] ...

Bulletin 2015-2. Feb. 17. Freddie Mac announced updates to the following: Guide Forms 16SF, Annual Eligibility Certification Report, and 1107SF, Seller/Servicer Change Notification Form, to implement a new requirement that seller/servicers review the Federal Housing Finance Agency’s Suspended Counterparty program list; and Form 1035, Document Custodial Agreement: Single-Family Mortgages. On the servicing side, Freddie revised notification requirements for bankruptcy cramdowns, including Form 1155, Bankruptcy Cramdown Pre-Confirmation Proposal Settlement Terms. It updated reporting and remittance requirements for properties purchased by third parties at foreclosure sale, including new Form 1160, Third-Party Sale Transmittal Worksheet. Freddie also updated rollback reporting requirements and insurance loss settlement requirements, and made clarifications related to bankruptcy filings after a foreclosure sale...

Servicers are benefitting from quicker transaction times on short sales, according to Fannie Mae. The government-sponsored enterprise said transaction time has been cut in half for short sales compared with the end of 2012, though the number of these transactions has also declined significantly. Short-sale transaction timelines currently average 45 days to 60 days, down from an average of 120 days in late 2012, according to a post on Fannie’s Housing Industry Forum website. The GSE said the HomePath short sale portal has helped reduce the time it takes to complete a short sale. The portal was released...

The default risk index for securitized agency purchase mortgages rose to a new high in January, the fifth straight month of a steady increase in the composite National Mortgage Risk Index, according to the American Enterprise Institute. The NMRI increased to 11.97 percent, a 0.4 percentage point increase from the average default risk in fourth quarter last year and 0.8 percentage points up year over year. Data also indicated...

Only one lender accounted for more than 10 percent of the single-family mortgage volume completed by Fannie Mae and Freddie Mac in 2014: Wells Fargo. The bank also dominates deliveries to Ginnie Mae and originations of jumbo mortgages. Wells had $180.89 billion in mortgage originations in 2014, accounting for 14.6 percent of total mortgage originations, according to Inside Mortgage Finance. The bank’s share of mortgage originations declined from 18.9 percent in 2013 as refinance activity slowed and nonbanks made efforts to compete for production and servicing. Officials at Wells said...