The Federal Housing Finance Agency is pushing its own version of mortgage reform: an ambitious agenda of standardizing Fannie Mae and Freddie Mac securitization operations to the point that their MBS are interchangeable. The plan, hatched in the absence of any substantial move by Congress or the Obama administration to address the nearly four-year-old conservatorships of the government-sponsored enterprises, has won broad endorsement from the lending and securitization industries. But some analysts say the FHFA strategy will make things worse, not better. Karen Shaw Petrou, managing partner of Federal Financial Analytics, a proprietary think-tank in Washington, DC, characterized the idea as “seductive” and “dangerous as all get-out.” First, there’s the issue of whether the two GSEs could be...

As Congress returns from its August recess next week for an abbreviated legislative session, mortgage market watchers inside the Capitol Hill beltway forecast a significant shift in the focus of those seeking to oust the current head of the Federal Housing Finance Agency. When Congress adjourned for the summer six weeks ago, lawmakers were alternately fuming or lauding the long-awaited decision by FHFA Acting Director Edward DeMarco to not allow Fannie Mae and Freddie Mac to implement the Treasury Department’s Home Affordable Modification Principal Reduction Alternative.

Guaranty fees that Fannie Mae and Freddie Mac charge lenders will rise later this year following a directive from the GSEs’ conservator but industry officials note concern about the potential unintended consequences of spurring additional, future g-fee hikes too soon. Late last week, the Federal Housing Finance Agency announced g-fees on single-family will rise another 10 basis points. The increase is effective Dec. 1, 2012, for loans exchanged for mortgage-backed securities, and on Nov. 1, 2012, for loans sold for cash.

Despite increased activity in the Fannie Mae and Freddie Mac refinance programs for underwater borrowers during the second quarter of 2012, total refi originations declined by 4.8 percent from the first three months of the year, according to a new Inside Mortgage Finance analysis and ranking. Refinance activity still accounted for 68.1 percent of originations during the most recent quarter, but that was down from 75.3 percent in the first three months of the year. Partly offsetting the drop in refi business was a 35.8 percent increase in purchase-mortgage originations, which rose to an estimated $129.0 billion in the second quarter. But compared to the first half of 2011, purchase-mortgage lending was down 1.3 percent as of the midway point this year. Refinance originations appear to be climbing in the third quarter. Data on Fannie and Freddie securitization activity in July and August suggest that total refi business at the government-sponsored enterprises is...[Includes four data charts]

Fannie Mae and Freddie Mac late this year will raise guaranty fees on single-family mortgages by another 10 basis points, under a directive that the government-sponsored enterprises’ conservator announced late last week. The g-fee increases will be effective on Dec. 1, 2012, for loans exchanged for mortgage-backed securities, and on Nov. 1, 2012, for loans sold for cash. According to FHFA Acting Director Edward DeMarco, who telegraphed the move in a notification to Congress earlier this summer, the g-fee increases are designed...

The Treasury Department’s surprise announcement late last week that it will now “sweep” up any and all future profits from Fannie Mae and Freddie Mac in lieu of the dividends the GSEs had been paying in return for taxpayer support solves some problems but creates new ones, industry observers say. Rather than continue to borrow from the Treasury to make dividend payments to the Treasury – as the GSEs have since they were placed in conservatorship in September 2008 – the revised preferred stock purchase agreements will replace the 10 percent quarterly dividend with a “full income sweep” of “every dollar of profit that each firm earns going forward,” according to Michael Stegman, counselor to the Treasury for Housing Finance Policy.

The Federal Housing Finance Agency this week announced that Fannie Mae and Freddie Mac will implement new short sale guidelines that expand eligibility criteria, as well as align and consolidate existing GSE short sales programs into one standard offering. The new guidelines, which go into effect Nov. 1, will permit homeowners with a Fannie or Freddie mortgage to sell their home in a short sale even if they are current on their mortgage, provided they have an eligible hardship.

Fannie Mae and Freddie Mac’s newly amended preferred stock purchase agreement with the U.S. Treasury requiring the companies to accelerate the rate at which they reduce their investment portfolios will have little immediate impact but will become more challenging to the GSEs as time goes on, analysts predict. The Treasury’s amended agreement calls for the GSE portfolios to be wound down at an annual rate of 15 percent, instead of the 10 percent annual reduction originally required of the two companies. The more aggressive 15 percent reductions will go into effect in 2013. Consequently, Fannie’s and Freddie’s portfolios must be reduced to the $250 billion target by 2018, four years earlier than initially scheduled.

Both Fannie Mae and Freddie Mac retained their dominant shares of mortgage-backed securities with something of a slide during the second quarter of 2012, according to an Inside The GSEs analysis. The two GSEs issued a combined $273.9 billion MBS during the second quarter, a 10.2 percent decrease from the first quarter. Compared to the second quarter of last year, however, Fannie and Freddie saw an ample 76.8 percent increase in MBS issuance.

A federal appeals court has agreed to hear a rare appeal by one of the non-agency mortgage-backed securities issuers and underwriters being sued by the Federal Housing Finance Agency for allegedly misrepresenting the deals that were sold to Fannie Mae and Freddie Mac. A three-judge panel of the Second Circuit Court of Appeals accepted UBS Americas’ appeal to re-argue and reverse a lower court’s denial of the bank’s motion to dismiss the FHFA’s suit as time-barred under the Housing and Economic Recovery Act.The FHFA sued UBS in July 2011 on behalf of Fannie and Freddie, seeking damages and civil penalties on behalf of the government-sponsored enterprises under the Securities Act of 1933.