A federal judge last week granted limited discovery to a hedge fund representing a group of Fannie Mae and Freddie Mac shareholders as they challenge the government’s “net worth sweep” of their profits. But the court will keep a tight lid on public access to the documents in a nod to the government’s claim that a leak could have dire economic consequences on the mortgage market. Fairholme Capital Management has been pushing hard for discovery and access to internal government documents since the shareholder filed suit last summer demanding that the Treasury Department void its August 2012 Third Amendment to its preferred stock purchase agreement with Fannie and Freddie. In her ruling, Judge Margaret Sweeney of the U.S. Court of Federal Claims was...

As a way to keep a tight grip on counterparty risk, Freddie Mac will start conducting bimonthly “operational reviews of certain specialty servicers” later this year. Not to be outdone, Fannie Mae will also perform such reviews, but only when a seller/servicer reaches a “certain mortgage loan delivery threshold.” The news – contained in a recent report from the Inspector General of the Federal Housing Finance Agency – isn’t likely to warm the hearts of fast growing nonbanks. Both Nationstar Mortgage and Walter Investment Management are mentioned by name in the report, which voices concerns thatsome nonbanks pose a risk to the government-sponsored enterprises because they have “limited financial capacity” to make good on representation and warranty contracts. Nationstar and Walter are...

More than two years have passed since Bank of America parted ways with Fannie Mae on selling new purchase-money loans to the government-sponsored enterprise and no remedy seems in sight regarding a resolution to the matter. “There’s no change that I’m aware of related to the Fannie Mae situation,” said a spokesman for the bank. “We’re able to handle our loan origination business just fine with Freddie Mac.” According to figures compiled by Inside MBS & ABS, BofA did sell...

MBS from Freddie Mac backed by modified mortgages offer investors protection from prepayment risk in an environment in which interest rates are expected to climb, according to analysts at Barclays Capital. The analysts said Freddie’s H-pools are particularly attractive, as the loans in the deals have been restructured under the Home Affordable Modification Program. Slightly more than $1.0 billion in H-pools have been issued, with the most recent activity in October. Barclays noted that Freddie could significantly increase its issuance of H-pools as the government-sponsored enterprise has accumulated a substantial amount of modified mortgages in its retained portfolio in recent years. Freddie had...

Fannie Mae late last week priced its third credit risk-sharing deal of 2014. The $2.05 billion note is the government-sponsored enterprise’s fourth and largest transaction under its Connecticut Avenue Securities series since the Federal Housing Finance Agency ordered both Fannie Mae and Freddie Mac to shrink the GSEs’ role in the U.S. housing market last year. In its latest offering – Series 2014-C03 – Fannie included reference loans with original loan-to-value ratios of up to 97 percent and “is consistent with prior transactions.” Previous C-deal offerings included reference loans with up to 80 percent LTV ratios. “We’ve continued...

One critic of the report on nonbank risk had this to say: “It’s just ridiculous what they [the IG] get away with. There’s risk in every business. Don’t they get it?”

“Prospect has a target list and they have an audience,” said one advisor. “But so far, in the mortgage M&A market there has been a lot of talk – with not too many deals getting done.”

Over five years, Fannie and Freddie would be wound down, but would be allowed to be sold and recapitalized as private entities with different business plans.

The modest rebound in non-agency MBS issuance during the first three months of 2014 fizzled during the second quarter of the year, according to a new analysis and ranking by Inside MBS & ABS. A total of just $1.60 billion of non-agency MBS were issued during the second quarter, a 62.7 percent decline from the previous period. It was the lowest quarterly volume in new issuance since the financial crisis of 2008. On a year-to-date basis, new issuance was...

After hearing from some market participants about certain unintended consequences, the Financial Industry Regulatory Authority decided to revise its earlier proposal to establish margin requirements for to-be-announced transactions to accommodate smaller players in the market. Last week, its board authorized FINRA to file with the Securities and Exchange Commission the revised amendments to FINRA Rule 4210 (Margin Requirements) to establish margin requirements for TBA transactions (including adjustable-rate mortgage transactions), specified pool transactions, and transactions in collateralized mortgage obligations, with forward settlement dates. The proposal is...