The Federal Housing Finance Agency this week defended its massive legal action against many of the nation’s largest financial institutions on behalf of Fannie Mae and Freddie Mac over the government-sponsored enterprises’ losses on non-agency mortgage backed security purchases. The Finance Agency contends that 17 financial institutions sold Fannie and Freddie some $196 billion of MBS, mostly between 2005 and 2008, that caused losses to the GSEs for which there should be compensation. Filed late last week in federal and state courts in New York and in federal court in Connecticut, the lawsuits seek damages and civil penalties under... [Includes one data chart]

Experts agree that the federal government plays too big a role in the housing market, but panelists at a Federal Reserve conference last week said there is little consensus on how to fix it. FHA is “not our silver bullet,” observed Janis Bowdler, a director at the National Council of La Raza. “Surely, it’s stepping in while we are in a tight credit market. But it’s no long-term solution.” One problem with FHA is that lenders aren’t required to offer it, which means entire communities are left “credit-starved,” Bowdler said. “This leaves them in the same vulnerable position to predatory lenders that they were in five or six or 10 years ago,” she...

Fannie Mae made its second foray of 2011 into the non-agency MBS market by providing a guarantee wrap on a $690.6 billion deal backed by previously modified FHA and VA mortgages. Government Loan Securitization Trust 2011-FV1 is comprised of government loans originated by Wells Fargo and Wachovia. All the loans were previously securitized in non-agency MBS backed by Fannie wraps, including some that date back to 2001. The average age of the loans since modification is 132 months, and 91.2 percent of them are insured by the FHA. According to the prospectus, 19.8 percent of the loans were 30-days delinquent and 35.9 percent were more than...

The Federal Housing Finance Agency this week became among the latest, most influential parties to legally weigh in on the proposed $8.5 billion Bank of America settlement over non-agency mortgage-backed securities.On Aug. 30, the deadline to file objections to the deal, the Finance Agency filed a “Notice of Appearance and Conditional Objection” with the U.S. District Court in Manhattan on behalf of Fannie Mae and Freddie Mac.

Default technology provider Commerce Velocity, based in Irvine, CA, recently upgraded its Optimizer solution to help servicer clients achieve the new requirements for Fannie Mae’s Quality Right Party Contact initiative. The original version of Optimizer enabled servicers to maximize cash flows from delinquencies, and enforce workout consistency throughout the default management process. By applying net present value calculations, cash flow projections, valuation models, and comprehensive workout guidelines, the technology provides “the most intelligent outcomes possible,” the company said. The Optimal Outcome module monitors...

A proposal to rid the agency mortgage programs of some of their real estate-owned property through bulk sales has come under fire from Radar Logic, a housing research firm. The company said house prices continued to drop in June, down 4.7 percent from a year ago, and bulk sales of REO properties could hasten the fall. The Obama administration recently launched a fact-finding mission soliciting ideas and opinions about ways to reduce the massive REO inventories held by the FHA, Fannie Mae and Freddie Mac. One solution is bulk sales to investors who would likely turn the houses into rentals. Radar Logic is afraid of possible...

Debt issuance for Fannie Mae, Freddie Mac and the Federal Home Loan Banks rose during the second quarter of 2011, while Freddie recorded a decline in new debt during the April to June period.The GSEs collectively issued $726.2 billion in new debt during the second quarter, a 2.6 percent increase from the previous quarter, while GSE debt outstanding at $2.168 trillion declined 4.8 percent from the first quarter.

The government will subsidize Fannie Mae and Freddie Mac new business to the tune of about $51.0 billion over the next 10 years, according to the latest projections from the Congressional Budget Office.CBO’s most recent budget and economic outlook, released in late August, increased its estimate of the subsidy cost for the two GSEs during the period between 2012 to 2021 from the approximate $41.6 billion that the CBO forecast in June.

Several of the prudential management and operations standards recently proposed by the Federal Housing Finance Agency are “duplicative of, or conflict with, current regulatory requirements” and should be further refined before final issuance, according to a comment letter written by the 12 Federal Home Loan Banks.The FHLBanks suggest numerous and significant revisions or clarifications to the proposed rule the FHFA issued in June.

In a not unexpected development, PMI Mortgage Insurance has become the second mortgage insurer in less than a month to be suspended by Fannie Mae and Freddie Mac as an approved GSE mortgage insurer after the company announced state regulators placed PMI under a supervisory order.Mortgages insured by PMI Mortgage Insurance or its affiliates PMI Mortgage Insurance Co. (MIC) and PMI Insurance Co. (PIC) with notes before May 19, 2011, or after Sept. 16, 2011, will no longer be purchased or securitized by Fannie or Freddie, the GSEs announced separately last week.