Fannie Mae and Freddie Mac will try to transfer the credit risk on 90 percent of their mainstream mortgage business in 2016 under new marching orders from the Federal Housing Finance Agency, but next year’s activity may end up being less than the 2015 total. The FHFA in the past has set credit-risk transfer goals based on specific dollar amounts. But next year’s target is to sell some of the credit risk on nearly all of the fixed-rate mortgages the two government-sponsored enterprises buy that have loan terms exceeding 20 years and loan-to-value ratios over 60 percent. Activity in the dwindling Home Affordable Refinance Program will be excluded. In the first 11 months of 2015, the two GSEs securitized...

The Securities Industry and Financial Markets Association advised Capitol Hill that the successful government-sponsored enterprise credit risk-sharing programs could be improved to increase liquidity and investor interest. In a letter to Sen. Richard Shelby, R-AL, chairman of the Senate Banking, Housing and Urban Affairs Committee, the Wall Street group said, “Up-front risk-sharing could make housing finance more efficient and sustainable by allowing the GSEs to achieve day-one risk transfers without having to warehouse credit risk until it can be distributed in a back-end credit transfer transaction.” It added...

The Federal Housing Finance Agency gave Fannie Mac and Freddie Mac their marching orders for 2016 by releasing its annual objectives late this week. Increasing access to credit, more risk sharing and continued work on building a new single security are among the primary goals for the year.As credit risk transfers continue to evolve, the FHFA said the GSEs should be transferring credit risk on a minimum of 90 percent of the unpaid principal balance of newly acquired single-family mortgages in loan categories targeted for risk transfer. For 2016, those targets include non-Home Affordable Refinance Programs, fixed-rate terms greater than 20 years, and loan-to-value ratios above 60 percent.

A new Inside The GSEs analysis reveals that seller repurchases of Fannie Mae and Freddie Mac mortgages fell to an all-time low during the third quarter as the industry continued to move beyond the havoc caused by pre-crash lending excess. Fannie and Freddie reported combined repurchases or other indemnification related to $434.2 million of home loans backing their mortgage-backed securities during the third quarter. That was down just 0.5 percent from the second quarter, but it was the lowest total since the GSEs began filing repurchase disclosures with the Securities and Exchange Commission back in early 2012. The GSEs also reported all-time lows in their inventory of pending and disputed buyback...

President Obama is expected to sign the $1.5 trillion omnibus spending bill this Friday, which includes several provisions in the Jumpstart GSE Reform Act and prohibits the GSEs from building capital anytime soon. The bill would prevent the Treasury from selling its stock in the GSEs, but would not prevent guaranty fee increases to fund other government spending. A recent twist introduced a sunset provision this week that would limit the prohibition on Treasury sales of GSE stock just for the next two years. Investors Unite, a shareholders trade group, noted that this provision is “effectively locking in the status quo of the flawed conservatorship well into 2017.” Section 702 of the 2,000-plus page omnibus spending bill limits the sale of...

The Federal Housing Finance Agency is tackling duty-to-serve rulemaking, several years after being mandated by the Housing and Economic Recovery Act, and issued a proposed rule this week that could expand the GSEs’ role in manufactured housing loans, affordable housing preservation and mortgages funded in underserved rural areas. FHFA is seeking comments on the proposed rule to implement duty-to-serve and its focus on making sure Fannie Mae and Freddie Mac are serving markets that have traditionally been underserved. The manufactured housing industry is one of those underserved markets where leaders have been asking for more clarity. “In developing the proposed rule, the FHFA tried to strike a balance between the requirements...

There was a flurry of activity, including a call for an investigation by the Department of Justice of Mortgage Bankers Association President David Stevens and two others, following a Dec. 7 New York Times piece criticizing the Obama administration and MBA for looking to shut down the GSEs. Stevens, along with Michael Berman, a former MBA chair, and Jim Parrott, senior fellow at the Urban Institute, all former government officials turned private-sector employees, each met with housing policy officials at the White House after leaving their government posts, according to a guest log review by the New York Times.

In hopes of ending a credit scoring system monopoly, Reps. Ed Royce, R-CA, and Terri Sewell, D-AL, recently introduced H.R. 4211, a bill that lets the GSEs consider alternative credit scoring models when deciding which mortgages to purchase. “The GSEs' use of a single credit score is an unfair practice that stifles competition and innovation in credit scoring,” said Royce. He added that breaking up the credit score monopoly at Fannie and Freddie will also assist them in managing their credit risk and decreases the potential for another taxpayer bailout. The Federal Housing Finance Agency directed the GSEs to look into the potential of alternative forms of credit scoring earlier this year.

The GSEs’ low-downpayment product still lacks any strong momentum but has witnessed modest growth since it was launched earlier this year. The FHA/VA maintains its place as the preferred product for borrowers in need of downpayment assistance. Ginnie Mae has accounted for 94.5 percent of purchase mortgages with loan-to-value ratios ranging from 95.1 percent to 97.0 percent that were securitized by the three agencies during the first 11 months of 2015, according to an analysis by affiliated publication Inside Mortgage Finance of loan-level data on agency mortgage-backed securities. Because LTV data is not available for all loans in Ginnie MBS, the agency’s actual share of these high-LTV loans is likely somewhat higher.

Fannie Mae and Freddie Mac both said they plan to ramp up their credit risk transfers in 2016 and explore more types of transactions. Representatives from the GSEs and FHFA spoke on a Securities Industry and Financial Markets Association risk-sharing panel last week in New York. This goes in line with Fannie’s and Freddie’s recently released 2016 scorecard in which the Federal Housing Finance Agency directed the GSEs to transfer credit risk on at least 90 percent of the unpaid balance of newly acquired mortgages. Laurel Davis, a Fannie vice president, said the GSE wants to continue to grow its investor base and added that Fannie was recently in Australia talking to potential investors.