Fannie Mae and Freddie Mac continued to reduce their retained mortgage portfolios during the third quarter by a combined $35.2 billion, a period in which Fannie reported a $2.2 billion gain in earnings while Freddie suffered a $475 million loss. Freddie Mac noted that its investments in less liquid assets were $114.2 billion at the end of the quarter, down 8 percent or $10.1 billion from the second quarter. The government-sponsored enterprise attributed this to its ongoing portfolio liquidation and the sales of $3.4 billion of non-agency MBS. Freddie also securitized $4.0 billion of single-family re-performing and modified loans. Since being placed in conservatorship, Fannie and Freddie have been...[Includes one data table]

A rule proposed late last month to impose margin requirements in the single-family “to-be-announced” market would draw in the multifamily housing finance programs of Fannie Mae and Ginnie Mae, according to industry trade groups. At issue is SR-FINRA-2015-036, a proposal to amend Financial Industry Regulatory Authority Rule 4210 margin requirements for TBA transactions, including adjustable-rate mortgage transactions, specified pool transactions, and transactions in collateralized mortgage obligations, issued in conformity with a program of an agency or government-sponsored enterprise, with forward settlement dates. In a letter last week to the Securities and Exchange Commission, more than a dozen industry groups expressed...

Freddie Mac and Fannie Mae both reported third quarter earnings this week but the numbers were in stark contrast to one another. Freddie announced a $475 million loss and set off a firestorm of reaction surrounding a possible Treasury draw when its reserves decline to zero. Two days later, Fannie posted net earnings of $2.2 billion for the third quarter. Freddie pointed to losses on derivatives used to hedge the company’s interest rate risk as the reason for its first loss in four years. In addition to falling interest rates, Freddie marked down its investment in derivatives by $4.17 million. Don Layton, Freddie’s CEO, noted that earnings volatility “stems from our usage of derivatives to...

The House approved an amendment to remove an extension of higher guaranty fees for Fannie Mae and Freddie Mac with strong bipartisan support. The Neugebauer-Huizenga amendment to H.R. 22, introduced by Reps. Randy Neugebauer, R-Texas, and Bill Huizenga, R-Mich., was adopted by the House on Nov. 5. About 30 industry trade groups, including lenders and builders, rallied behind the effort and sent a letter to Speaker Paul Ryan, R-WI, and former House Speaker Nancy Pelosi, D-CA, earlier this week urging that the g-fee extensions be removed. Without the amendment, a 10 basis point surcharge on Fannie and Freddie g-fees that went into effect in 2012 could have ended up...

Fannie Mae and Freddie Mac securitized $68.13 billion of single-family mortgages in October, an 8.2 percent decline from the previous month, according to a new Inside The GSEs analysis of mortgage-backed securities disclosures. The slowdown appears to be based on seasonal decline in home-purchase activity. The volume of purchase mortgages securitized by Fannie fell 15.3 percent, while Freddie’s purchase-mortgage activity dropped 11.6 percent. Fannie’s refinance activity was off 1.0 percent from September, while Freddie saw a 5.8 percent increase in its refi business for the month. Overall, Freddie single-family MBS issuance was down 7.2 percent from September, while Fannie’s volume fell 9.2 percent. On a year-to-date basis, both GSEs were still well ahead of the pace they set during the first 10 months of 2014.

With the GSEs’ capital reserve expected to hit zero by 2018, and in the wake of Freddie Mac’s third quarter earnings loss, industry leaders and observers have shifted their attention to addressing the possibility of a future draw from Treasury. Freddie posted a $475 million loss in the third quarter after marking down its investment in derivatives by $4.17 billion. This is the first time in four years that the GSE had a quarterly loss. Donald Layton, Freddie’s CEO, said in an earnings call that this loss represented 28 percent of the allowed capital reserve of $1.8 billion, so there’s no draw requested from the U.S. Treasury, but that didn’t stop speculation on what happens in the event of future losses.

The Federal Housing Finance Agency determined that Freddie Mac did not meet all of its low-income and very low-income home-purchase goals for 2014, according to the FHFA’s preliminary annual housing report released on October 30. Under the GSEs’ affordable housing goals, low-income is for home-purchase mortgages to families with incomes no greater than 80 percent of the area median income, and the very low-income home- purchase goal is for families with incomes no greater than 50 percent of AMI. Freddie fell short of meeting both goals. The low-income home-purchase goal was 23 percent and Freddie ended 2014 at 21 percent. The very low-income home-purchase goal was 7 percent and Freddie topped out at 4.9 percent.

The furor continues to grow over recapitalizing and releasing Fannie Mae and Freddie Mac, and this week’s third quarter earnings report, along with recent comments by senior government officials, likely only intensified the debate. Several industry groups addressed letters to President Obama urging the White House to take a stand now instead of waiting for housing reform legislation in Congress and release the GSEs from conservatorship while allowing them to re-build capital. The most recent letter was from two mortgage trade groups that represent smaller nonbanks. This week, the Community Home Lenders Association and Community Mortgage Lenders of America addressed a letter to Obama arguing that the Federal Housing Finance Agency has the power under a...

A bill to cap the salaries of Fannie Mae and Freddie Mac CEOs at $600,000 is expected to become law, but has been rescheduled for vote in the House sometime during the week of Nov. 16. The budget vote last week, coupled with the debate over the Export-Import Bank and election of a new House Speaker, resulted in the salary cap legislation being postponed for a floor vote at a later date this month, said Rep. Ed Royce, R-CA. Royce introduced the “Equity in Government Compensation Act” back in May. It would suspend the $4 million compensation packages for Fannie’s Timothy Mayapoulos and Freddie’s Donald Layton that were approved early this year after...

Investors will be able to exchange existing Freddie Mac participation certificates for new single securities when the GSE creates new “mirror” securities to help facilitate the transition.The exchange program will be available when the new single security goes live and Freddie plans to keep it open for the foreseeable future. Held in a Federal Reserve account, the mirror securities will not increase the outstanding principal balance of Freddie MBS, the GSE explained in an update on the exchange program. The mirror securities will track existing Freddie MBS but substitute a 55-day payment cycle for Freddie’s current 45-day cycle. Freddie will pay compensation equal to the fair market value of the 10 days of lost float when...