Fannie Mae and Freddie Mac are reportedly in talks with the Securities and Exchange Commission to settle claims that the two GSEs failed to disclose to investors the companies’ exposure to risky subprime mortgages prior to the 2008 housing market crash.

Two Ohio pension funds have filed suit in federal court against the Federal Housing Finance Agency to overturn a recent Finance Agency rule that could curtail any award for damages the funds might someday receive in their securities fraud suit against Fannie Mae. In papers filed in the U.S. District Court, District of Columbia, lawyers for the Ohio Public Employees Retirement System and the State Teachers Retirement System of Ohio disputed a final rule issued…

The official watchdog of the Federal Housing Finance Agency says it will monitor and continuously assess the performance of its audits, evaluations and investigations of the Finance Agency over the next couple of years.The FHFA’s Office of Inspector General, which released its new strategic plan for the 2012-2014 fiscal years last week, said it has developed four core strategic performance goals: adding value, operating with integrity, promoting productivity and valuing employees.

With the mortgage finance industry in turbulence and a fast-changing regulatory landscape, banks have been forced to reevaluate how they optimize processes and become more cost-efficient, making “operational certainty the need of the hour,” according to an expert at a webinar held this week by NelsonHall. The market is seeing an increase in defaults but a decrease in mortgage originations, noted Sandip Sahni, practice head of business process services at Tata Consultancy Services. This has led to mortgage providers having to deal with fluctuations in volume and costs, and in response, service providers are creating more...

A Senate lawmaker and the Mortgage Bankers Association warned House lawmakers that a narrow “qualified residential mortgage” rule will result in overuse of the FHA program and make it more difficult for private capital to re-enter the housing finance market. Testifying before the House Financial Services Subcommittee on Insurance, Housing and Economic Opportunity last week, Sen. Johnny Isakson, R-GA, said the six federal agencies charged with crafting risk-retention requirements apparently failed to consider the impact of a narrow QRM rule on the FHA program. Isakson, who co-authored a Senate exception to...

Goldman Sachs has been ordered to retain an independent consultant to review foreclosure proceedings initiated by its former subsidiary, Litton Loan Servicing LP, under a formal enforcement action announced by the Federal Reserve Board last week. The firm was also required to provide financial remediation to affected borrowers. Additional monetary penalties are likely to be announced shortly. The Fed said it was acting against Goldman Sachs “to address a pattern of misconduct and negligence relating to deficient practices in residential mortgage loan servicing and foreclosure processing” involving Litton. Goldman sold...

Real estate investment trusts that invest in mortgage-backed securities are on the defensive after the Securities and Exchange Commission said last week that it is considering revising rules for mortgage REITs. “Mortgage REITs provide private capital to these markets, while allowing individual investors to opt in or out of the associated risks,” Thomas Siering, president and CEO of Two Harbors Investment, said this week in a letter to the REIT’s shareholders. ...

Senate Republicans’ commitment to block the confirmation of any nominee to the Consumer Financial Protection Bureau will prevent the agency from deploying all of its supervisory and enforcement powers – at least as far as nonbanks are concerned – and that’s infuriating Senate Democrats. Partisan squabbling was on full display this week as the Senate Banking, Housing and Urban Affairs Committee considered President Obama’s nomination of Richard Cordray, currently chief of enforcement for the CFPB, to be the first director for the fledgling agency. “The purpose of today’s hearing should be to consider whether Mr. Cordray is qualified for that job. Instead...

The Securities and Exchange Commission is weighing possible changes to a key rule that allows MBS and ABS issuers to avoid being classified as investment companies. Although the agency’s primary focus is on whether it should ditch existing references in the exemption to credit ratings, officials are also looking at other potential changes. Rule 3a-7 was promulgated nearly 20 years ago so that asset-backed securities issuers would not be classified...

The Securities and Exchange Commission this week asked for public comment as it begins to reconsider whether mortgage real estate investment trusts and other mortgage-related pools that acquire mortgages and mortgage-related instruments should remain exempt from the requirements of the Investment Company Act. The SEC said it is concerned that some mortgage-related pools, as pooled investment vehicles, may raise...