The Federal Housing Finance Agency violated federal law when it rolled back the Property Assessed Clean Energy program without going through the required notice and comment period, a California federal judge ruled earlier this month. U.S. District Judge Claudia Wilken’s Aug. 9 ruling held that the FHFA was not acting as conservator of Fannie Mae and Freddie Mac but as a regulator that had improperly exercised substantive regulatory oversight in violation of the Administrative Procedure Act when the agency put a stop to GSE involvement with PACE programs.“The FHFA’s directives on PACE obligations amount to substantive rule-making, not an interpretation of rules that would be exempt from the notice and comment requirement,” wrote Judge Wilken. “The notice and comment process must be followed.”

A New York federal judge has denied a motion by former Fannie Mae top executives to dismiss a civil action brought against them by the Securities and Exchange Commission concerning the company’s misrepresentations about its exposure to subprime and Alt A mortgages in the two years leading up to the GSE’s government takeover. On Aug. 10, U.S. District Court Judge Paul Crotty rejected the motion brought by former Fannie CEO Daniel Mudd, former Chief Risk Officer Enrico Dallavecchia and former EVP for Single Family Thomas Lund. The defendant trio argued that investors had sufficient information to form their own conclusions about the viability of Fannie’s subprime and Alt A portfolio.

A three-judge federal panel this week agreed to hear a rare interlocutory appeal by one of the defendants in a series of lawsuits that the Federal Housing Finance Agency has filed in connection with non-agency MBS purchased by Fannie Mae and Freddie Mac. The Second Circuit Court of Appeals accepted UBS Americas’ appeal, which had been certified by Judge Denise Cote of the U.S. District Court of New York in late June. UBS seeks to re-argue and reverse Judge Cote’s May 4 denial of the bank’s motion to dismiss on statute of limitation grounds. The FHFA sued...

The rising delinquency rates for FHA-insured mortgage loans could spell trouble down the road for the FHA as it struggles to shore up its dwindling loss reserves, according to a new Fitch Ratings analysis. But the chief economist for the Mortgage Bankers Association has a slightly different take on that issue. Fitch analyst Brian Bertsch said a growing gap between seriously delinquent (90-day past due) guaranteed and non-guaranteed loans could presage future losses that could prompt the FHA to restrict loss claims and force banks to buy back defaulted loans. This could be the scenario ...

Ocwen Financial Corp. and joint venture partner Altisource will soon be buying FHA-insured loans from lenders through a special vehicle, Correspondent One, for future securitization. In its second quarter filing with the Securities and Exchange Commission, Ocwen said it expects Correspondent One will be able to use its relationship with Lenders One to grow its volume substantially. “Correspondent One has seen significant, positive environmental changes in the correspondent lending market, [and] there has been a contraction in correspondent lending,” Ocwen said, alluding to ...

The Federal Housing Finance Agency’s public expression of “concern” last week about proposals to use the eminent domain powers of local governments to seize performing underwater mortgages might be enough to significantly delay or even derail the effort outright, say experts. The conservator of Fannie Mae and Freddie Mac and regulator of the 12 Federal Home Loan Banks warned that unspecified “action might be necessary” on its part “to avoid a risk to safe and sound operations” at the government-sponsored enterprises. “FHFA has significant concerns about the use of eminent domain to revise...

A federal judge in New York last week rejected the motion by a trio of former Fannie Mae executives to dismiss a securities fraud civil lawsuit brought late last year against the top GSE officers by the Securities and Exchange Commission. In December 2011, the SEC filed suit in the U.S. District Court for the Southern District of New York alleging that former Fannie executives made material misrepresentations to the public, investors and the media about the government-sponsored enterprise’s exposure to subprime mortgage loans in 2007 and 2008. The SEC filed an identical parallel civil suit against Freddie Mac the same day. The SEC’s complaint against former Fannie executives Daniel Mudd (CEO), Enrico Dallavecchia (chief risk officer) and Thomas Lund (EVP for single family) alleges...

The Federal Housing Finance Agency this week joined a growing chorus raising warnings about proposals to use the eminent domain powers of local government to seize performing underwater mortgages out of non-agency MBS pools. In an unusual move, the agency said it has “significant concerns about the use of eminent domain to revise existing financial contracts and the alteration” of Fannie Mae, Freddie Mac and Federal Home Loan Bank securities holdings. The FHFA formally invited public comment on the concept and warned that “action may be necessary on its part [as conservator and regulator of the government-sponsored enterprises] to avoid a risk to safe and sound operations and to avoid taxpayer expense.” The issue drew attention this week because both Fannie and Freddie managed...[Includes one data chart]

Single-family MBS issuance in the agency market dropped 4.8 percent from June to July, according to a new Inside MBS & ABS market analysis and ranking. A total of $133.23 billion of agency single-family MBS were issued last month, a huge 82.9 percent increase of the amount produced in July of last year. That brought year-to-date issuance in 2012 to $893.92 billion, an increase of 40.5 percent from the same period last year. Fannie Mae was the only agency to see...[Includes one data chart]

Both Fannie Mae and Freddie Mac emerged from the second quarter of 2012 firmly in the black with each company posting a free-and-clear profit – only the second time for each GSE since being drafted into government conservatorship nearly four years ago. The period ending June 30, 2012, marks the second consecutive quarter that Fannie will not require taxpayer assistance to keep the company going. Freddie will also not require an additional draw from the U.S. Treasury, the first time since the first quarter of 2011 which was the first time ever either GSE posted a profit since before conservatorship.