Last week, new GSE repurchase requirements announced this spring took effect as a potential alternative to repurchase for certain mortgage loans for which the mortgage insurance has been rescinded. Among the requirements are an “MI stand-in,” which Fannie Mae defines as “the full mortgage insurance benefit that would have been payable under the original mortgage insurance policy if the mortgage loan liquidates.” In May, both Fannie and Freddie Mac announced that repurchase requests will no longer be an automatic response in the event that MI is rescinded.

A new audit issued last week by the Federal Housing Finance Agency’s official watchdog revealed that an unnamed nonbank special servicer raised red flags for Fannie Mae, Freddie Mac and their regulator.The report by the FHFA’s Office of Inspector General prompted the FHFA to issue guidance on the counterparty risk posed by nonbank servicers by year’s end. The OIG audit said the Finance Agency and the two GSEs “have responded well to specific problems at nonbank special servicers.”

Modified Freddie Mac mortgages performed somewhat better than Fannie Mae loans for up to two years after modification as the performance gap between the two GSEs closed slowly, according to the Office of the Comptroller of the Currency. The OCC’s latest Mortgage Metrics Report noted that Freddie loans had a 15.6 percent re-default rate six months after modification, while Fannie mods saw a 16.3 percent rate. At the 12-month mark, Freddie stood at 22.3 percent compared to Fannie’s 23.4 percent.

HSBC failed to implement and maintain required quality controls and failed to oversee the foreclosure-related charges it submitted to the FHA and Fannie Mae, resulting in unspecified millions of dollars in taxpayer losses, according to federal investigators. Under the terms of the civil settlement announced last week by the Manhattan U.S. Attorney’s office and the Federal Housing Finance Agency’s Inspector General, HSBC will pay $10 million to settle charges that in 2009 and 2010 it failed to properly supervise foreclosure-related fees by outside lawyers and other service providers to the FHA and Fannie.

The Federal Housing Finance Agency remains committed under new management to deploy regulatory countermeasures against municipalities that move forward with proposed efforts to seize underwater mortgages via local eminent domain powers, agency officials say. After a quiet period when it appeared this issue was going away, eminent domain initiatives are cropping up again, including a recent push by a member of the San Francisco Board of Supervisors to get the city to partner with Richmond, CA.

Senate Confirms New HUD Secretary, FHFA IG Nominee on Hold. The Senate this week voted 71-26 to approve San Antonio Mayor Julian Castro’s nomination to be secretary of the Department of Housing and Urban Development. During his confirmation hearing last month before the Senate Banking, Housing and Urban Affairs Committee, Castro told Senators he thinks taxpayers should have more protection than they have now under the current GSE structure, though he did not back a specific legislative proposal. As HUD secretary, Castro is one of four members of the Federal Housing Finance Agency’s Oversight Board.

The rebound in new business at Fannie Mae and Freddie Mac during the second quarter of 2014 was fueled by a hefty increase in purchase-mortgage activity, but it also featured clear shifts in the volume of loans coming from different kinds of lenders. A new Inside Mortgage Trends analysis of loan-level data on mortgage-backed securities issued by the two government-sponsored enterprises shows that nonbank lenders continued to ... [Includes 3 data charts]

By now, the word is out: the Federal Housing Finance Agency is exploring codifying capital minimums for nonbank servicers as a way to help Fannie Mae and Freddie Mac better manage counterparty risk. Industry officials tracking the topic told Inside Mortgage Trends they don’t believe the FHFA is necessarily worried about the capital positions of the big three nonbanks: Nationstar Mortgage, Ocwen Financial, and Walter Investment Management ...

Fannie Mae and Freddie Mac generated $141.8 billion in single-family mortgage-backed securities during the second quarter of 2014, rebounding from the dismal first three months of the year, according to a new Inside The GSEs analysis. That was up 9.8 percent from the 14-year record low Fannie/Freddie MBS production of just $129.2 billion during the first quarter. However, the April-June cycle generated the second lowest quarterly volume since the end of 2008, and refinance volume continues to reach new lows – falling another 8.5 percent from the previous quarter.