Fannie Mae and Freddie Mac saw a noticeable decline in Home Affordable Refinance Program activity during the final months of 2012, according to a new Inside MBS & ABS analysis. At a time when overall refinance business rose 11.0 percent at the two government-sponsored enterprises, deliveries of HARP loans fell 6.9 percent. The biggest decline was in issuance of MBS specifically geared for underwater mortgages. A total of $62.28 billion of high loan-to-value ratio mortgages were securitized...[Includes two data charts]

The massive legal action initiated by the Federal Housing Finance Agency about a year and a half ago on behalf of Fannie Mae and Freddie Mac against many of the nation’s biggest non-agency MBS issuers and underwriters for allegedly misrepresenting toxic MBS netted its first settlement this week with the prospect of more where that came from. In papers filed with the U.S. District Court, Southern District of New York, the FHFA “voluntarily dismisses with prejudice” its lawsuit against General Electric Co., ending the legal action in which the FHFA had claimed the firm had misled Freddie into purchasing some $549 million of toxic MBS. “This settlement resolves...

The Federal Housing Finance Agency and General Electric this week settled a lawsuit filed by the FHFA in 2011 regarding $549.0 million in non-agency mortgage-backed securities purchased by Freddie Mac. The settlement is the first on the FHFA’s 18 pending non-agency MBS lawsuits. The terms of the settlement were not disclosed. Residential Capital agreed to pay $297.6 million to Fannie Mae this week, prompting the government-sponsored enterprise to drop its objection to ResCap ... [Includes four briefs]

Mortgage bankers funded $232.69 billion worth of FHA loans in 2012, a 22 percent jump from the year prior, but the improvement pales in comparison to business gains experienced by Fannie Mae and Freddie Mac, according to exclusive loan-level data compiled by Inside FHA Lending. By comparison, Fannie grew its business by almost 46 percent last year with Freddie improving loan purchases from seller/servicers by 49 percent. Still, it was FHA’s best quarterly showing ($64.03 billion) since the fourth quarter of 2010 when mortgage lenders originated $72.12 billion of product. And not surprisingly, consumers taking out FHA loans ... [2 charts]

Stringent appraisals have hindered home sales, limiting purchase-mortgage originations and constraining home prices, according to real estate agents responding to the latest Campbell/Inside Mortgage Finance HousingPulse Tracking Survey. Appraisers counter that they are accurately pricing homes and cite burdensome regulations along with new requirements from lenders trying to avoid buybacks. In certain circumstances, appraised home prices have been set well below listing price, frustrating sellers that have received multiple offers. “Appraisals continue to cause problems as the market is trying to recover value, but tight appraiser guidelines are not keeping up with the agreed sales prices between buyers and sellers,” according to a real estate agent in Michigan. The sales-to-list price ratio has trended...

Fannie Mae is informing the mortgage cooperatives it works with that going forward that all the different affinity groups doing business with the government-sponsored enterprise will be treated the same when it comes to guaranty fees and charges for its Desktop Underwriter program, Inside Mortgage Finance has learned. One executive close to the situation told Inside Mortgage Finance that action by Fannie essentially “equalizes” all cooperatives in terms of the pricing breaks they receive from the GSE. Some affinity relationships have been in place...

A temporary exemption for Fannie Mae and Freddie Mac mortgages is among the plethora of provisions contained within the Consumer Financial Protection Bureau’s long-awaited “qualified mortgage” rule issued last week. Even so, credit unions fear onerous GSE buyback requirements may be an unintended consequence of the new rule.Called for by the Dodd-Frank Act, the CFPB’s QM rule lists the characteristics of a qualified mortgage, or one that regulators will presume will be within a borrower’s ability to repay the loan.

Last week’s $10 billion settlement between Fannie Mae and Bank of America over outstanding and potential repurchase claims is at least a truce in the bitter battle between the GSE and the bank that has simmered since the housing bubble burst. But the jury is still out as to how much business the two companies will do again going forward. Under the agreement, BofA will pay Fannie $3.55 billion cash and spend $6.75 billion to buy back some 30,000 loans sold by Countrywide Financial to the GSE. The “comprehensive solution” between the firms covers current and future repurchase obligations related to loans with an outstanding balance of $297 billion as of Nov. 30, 2012, that were originated and sold directly to Fannie from 2000 through 2008. The bank will also pay Fannie $1.3 billion in “compensatory fee obligations” for taking too long to address foreclosures.

With roughly $900 billion of mortgage servicing rights changing hands since October (or about to), and more on the way, Fannie Mae and Freddie Mac will be busy in the months ahead approving the transfer of MSRs.Much of the MSR product being sold by Bank of America in its recent deal with Nationstar Mortgage and Walter Investment Management Corp. is tied to loans guaranteed by Fannie, Freddie and Ginnie Mae.Servicing advisors who’ve worked with the GSEs note that their approval on a servicing sale is hardly a routine matter, especially if the product has high delinquencies, which is the case with some of the BofA receivables.

It’s no secret that Fannie Mae and Freddie Mac are back in the black when it comes to earnings, but in the quarters ahead the two are likely to perform even better as delinquencies and foreclosures continue to wane, and they move to recapture some of their massive loss reserves. But another factor could bolster their earnings as well: large legal settlements with the nation’s megabanks, which will go straight to their bottom line, according to an analysis done by Inside The GSEs. As part of Fannie’s buyback settlement with Bank of America (see related story on page 1), Fannie will receive some $3.6 billion in cash from the bank, plus BofA is repurchasing almost $7 billion in legacy loans.