Court Dismisses Freddie Shareholders Subprime Lawsuit. A federal appeals court this week dismissed a lawsuit brought by Freddie Mac shareholders accusing the GSE of hiding the state of its finances and it subprime mortgage exposure before the 2008 financial crisis.The shareholders – led by Central States, Southeast and Southwest Area Pension Fund – accused Freddie of hiding its potential insolvency even after revealing a $2 billion quarterly loss in November 2007. Freddie, along with fellow GSE Fannie Mae, was placed into conservatorship in September 2008.

Fannie Mae and Freddie Mac this week reported a combined $3.53 billion of mortgage repurchases and other buyback resolutions during the third quarter of 2013, the lowest quarterly amount in three years, according to a new analysis by Inside Mortgage Trends. Buyback resolutions declined by 28.2 percent from the second quarter, even as the government-sponsored enterprises wrapped up large-scale settlements with a handful of their largest sellers. Fannie and Freddie so far this year ... [Includes one data chart]

Freddie Mac’s “account balance” with the U.S. Treasury will go into the black by yearend – thanks to stellar third-quarter earnings – and Fannie Mae likely will accomplish the same by the end of March 2014. But mortgage bankers shouldn’t pop any champagne. That’s the view of Dave Stevens, president of the Mortgage Bankers Association who worked at Freddie once and also served as FHA commissioner. Stevens believes that despite their strong performance in the third quarter and beyond, both are just “insurance brokers” that have benefitted from the Federal Reserve buying their mortgage-backed securities. [Includes one data chart.]

Fannie Mae and Freddie Mac issued $67.7 billion in single-family mortgage-backed securities during the month of October, a 13.8 percent decline from September but a 4.6 percent rise for the first 10 months of 2013, according to a new Inside The GSEs analysis. October’s decline was less steep than September’s 20.0 percent month-to-month fall off in MBS.Top-ranked Wells Fargo’s Fannie and Freddie securitization at $11.6 billion fell both on monthly and year-to-date bases by 27.0 percent and 23.3 percent respectively. [Includes one data chart.]

Depending on how the Senate’s housing finance reform legislation comes out in the end, the Federal Home Loan Banks could play an even larger role in helping smaller lenders successfully access the secondary market, Richard Swanson, president and CEO of the Des Moines Bank, said this week. Testifying before the Senate Banking, Housing and Urban Affairs Committee, Swanson said that the secondary mortgage market, as envisioned by S. 1217 by Sens. Bob Corker, R-TN, and Mark Warner, D-VA, would allow the 12 FHLBanks to serve in an expanded role as mortgage aggregators.

The Federal Housing Finance Agency spent the last two weeks racking up several legal settlements in its massive litigation action against some of the nation’s financial institutions. Look for more to come predict industry analysts. On Oct. 25, JPMorgan Chase agreed to pay $4.0 billon to settle claims on $33.8 billion of non-agency mortgage-backed securities purchased by Fannie Mae and Freddie Mac.

Despite this year’s implementation of a new Fannie Mae and Freddie Mac representations-and-warranties framework that promises repurchase relief with a three-year sunset on liability, the GSEs still hold all the cards and a very big stick when it comes to lenders managing their buyback risks, according to an expert during an exclusive Inside Mortgage Finance webinar this week. Jonathan Jaffe, a partner at the law firm of K&L Gates, told webinar participants that Fannie’s and Freddie’s hyper-aggressive enforcement of their repurchase options and frequently updated rules creates a near constant state of uncertainty for lenders who have been made all too aware that too much buyback resistance could result in them being on the wrong end of a “nuclear” exchange.

Industry observers doubt the White House’s commitment to replace the current interim head of the Federal Housing Finance Agency, despite louder recent lip service, following an embarrassing, if not unexpected, rejection last week by the Senate of the Congressman who would be the new FHFA director. On Oct. 31, Senators voted 56 to 42 to limit floor debate on the nomination of Rep. Mel Watt, D-NC. The final tally was well below the 60-member supermajority required to invoke cloture and shutter any potential filibuster under current Senate rules.

Spencer Stuart, a search firm working for the Federal Housing Finance Agency, has talked to a top official at the Consumer Financial Protection Bureau about being the CEO of the fledgling Common Securitization Solutions platform project, Inside The GSEs has learned. The candidate for the CEO job is Peter Carroll, who currently serves as assistant director for mortgage markets at the CFPB.

Congress is making an important start on GSE reform but a final, tangible product may not come to fruition for several more years, according to Capitol Hill insiders. Speaking at the Mortgage Bankers Association’s annual convention in Washington, DC, last week, former House Financial Services Committee Senior Counsel Michael Borden and former Senate Banking, Housing and Urban Affairs Committee Staff Director Dwight Fettig agreed it’s a virtual certainty that a final reform bill will not materialize during the 113th Congress.