Dividend payments paid by Fannie Mae and Freddie Mac to the U.S. Treasury for its continued financial support held down the two government-sponsored enterprises during the fourth quarter as Freddie would have otherwise posted a profit, while Fannie narrowed its losses during the final three months of 2011. Freddie actually reported $619 million in net income during the fourth quarter of 2011, compared to the third quarter’s net loss of $4.4 billion, before having to repay $1.7 billion in preferred stock dividends to the government. Under the terms of the GSEs’ purchase agreement, the Treasury is entitled...

The advance business for the 12 Federal Home Loan Banks continued to shrink again in 2011, dropping 12.6 percent from the previous year to $418.2 billion, according to preliminary figures released by the FHLBank Office of Finance. However, advances did increase slightly from the third to the fourth quarter. The overall 2011 decline came through “continued low demand by member institutions resulting from high levels of liquidity in the market, as well as high levels of deposits and low loan demand experienced at member institutions,” the OF explained.

Fannie Mae said last week that it acted first to end its existing mortgage loan delivery contract with Bank of America because of delays in resolving repurchase issues. The GSE’s account in its quarterly filing with the Securities and Exchange Commission is at odds with BofA’s announcement two weeks ago where the bank announced in its own SEC filing that it has stopped selling to Fannie due to “increasingly inconsistent” repurchase requests by the enterprise compared to past practice.

Commercial banks and their holding companies reported a small increase in mortgage banking income during the fourth quarter of 2011, but the industry earned far less for the year than it had in 2010. An Inside Mortgage Trends analysis of bank call report data shows that the industry reported $5.58 billion in mortgage banking income during the fourth quarter, up 2.0 percent from the previous three-month period. For the full year, banks posted a combined $5.21 billion in mortgage banking income – an amount that was actually less than the totals in both the third and fourth quarter. In the...(Includes one data chart)

The outlook for the private mortgage insurers remains grim as MI companies continued reporting significant operating losses in 2011 and, unless positive factors come into play by mid-2012, time may soon run out for the sector, according to a Standard & Poor’s analysis. As the U.S. economy struggles in recovery, little hope remains for mortgage insurers to begin reporting operating profits by the end of this year, said S&P senior credit analyst Ron Joas. Sluggish employment growth and the depressed housing market have resulted in more delinquencies that pose further...(Includes one data chart)

The massive shakeout in the warehouse financing industry that began in 2007 has left the door wide open for community banks and mid-sized regional financial institutions to enter and become essential providers of warehouse lending. Among the recent new entrants is EverBank Financial Corp., of Jacksonville, which last month signed an agreement to acquire MetLife’s warehouse finance business, boosting its potential to be one of the major players in the resurging sector. Terms and conditions of the acquisition agreement remain undisclosed and the deal is expected to be completed by the first half of 2012...

Bank of America and JPMorgan Chase will once again receive servicer incentives for modifying loans after more than seven months during which these payments were withheld by the Treasury Department for unsatisfactory performance in the Home Affordable Modification Program. The two banks will also get all the withheld incentives as part of the multistate foreclosure settlement. In June 2011, Bank of America, JPMorgan and Wells Fargo were all called to the carpet by the Treasury for their HAMP performance following a 10-month audit of participating servicers. The main issue was timeliness – while mods...

Mortgage lenders have become so risk-averse and sensitive to potentially punitive judicial or regulatory overkill that they’re demanding near-pristine credit histories and imposing their own credit overlays on top of existing underwriting standards that are already considerably tougher than they were during the years of the mortgage boom. And that’s unlikely to change and may in fact get worse unless federal policymakers make dramatic changes to the legislative and regulatory landscape. That was the main take-away that Paul Miller, managing director and group head of financial services research at...

MBS investors continue to sweat over the impact of the $25 billion multistate servicing settlement, especially regarding potential conflicts of interest when banks own a second mortgage while servicing a securitized first lien. “The minimum requirement is that every time you modify a first lien, you have to modify the second lien to the same degree, or you have to write off the second lien entirely,” explained Shaun Donovan, secretary of Housing and Urban Development, at a housing conference earlier this week. Donovan characterized the treatment of home-equity loans in the settlement as a positive...

There are additional signs of emerging investor interest – and perhaps more importantly, actual capital – for plowing into mortgage-related bonds, residential and commercial alike. Earlier this week, the Federal Reserve Bank of New York used a competitive process to sell off the remaining $6.0 billion of securities in the Maiden Lane II portfolio to Credit Suisse Securities. The New York Fed said the move will result in full repayment of the $19.5 billion loan it extended to ML II and generate a net gain for the U.S. taxpayer of about $2.8 billion, including $580 million in accrued interest on the loan...