The Home Affordable Refinance Program hit record levels in the third quarter of 2012, with 286,044 Fannie Mae and Freddie Mac borrowers taking advantage of the program designed for underwater borrowers. That was up 17.8 percent from the second quarter and raised total participation in the program to 1.73 million since it began back in 2009. The biggest gains this year have been in the refinances of mortgages with loan-to-value ratios exceeding 105 percent [Includes one data chart] ...

For the fourth consecutive year, the Federal Housing Finance Agency received a clean audit from the Government Accountability Office on the FHFA’s annual financial statements, according to a recent GAO report. As required by the Housing and Economic Recovery Act of 2008, the GAO audited FHFA’s fiscal year 2012 to determine whether the financial statements were fairly presented and whether the FHFA’s management maintained effective internal control over financial reporting. The GAO said it also tested the Finance Agency’s compliance with selected laws and regulations.

Fannie Mae and Freddie Mac earlier this month announced new, synchronized requirements regarding the management of law firms for default servicing, bankruptcies, foreclosures and related litigation involving mortgages owned or guaranteed by the two GSEs. Effective June 1, 2013, Fannie’s and Freddie’s servicers will be allowed to choose their own attorneys, create their own processes for managing foreclosure processing and maintain direct relationships with their law firms. The new rules also require servicers to establish procedures to manage and monitor all aspects of the law firm’s performance and compliance with applicable requirements. Upon request, servicers will be required to perform a due diligence review and notify the GSEs of the result.Fannie’s and Freddie’s new rules were issued at the direction of the GSEs’ conservator, the Federal Housing Finance Agency. The directive comes more than a year after the FHFA’s Office of Inspector General dinged the agency for lax oversight of the GSEs and problems involving improper foreclosure practices with their affiliated law firms.

For the third time in as many months, a federal judge has summarily dismissed a securities class action lawsuit against a former Fannie Mae executive. U.S. District Judge Richard Leon threw out the case against Leanne Spencer, Fannie’s former controller, brought nearly a decade ago by investors hoping to recover damages. Two Ohio pension funds – the Ohio Public Employees Retirement System and the State Teachers Retirement System of Ohio – filed suit in 2004 related to a $6.3 billion overstatement of earnings against Fannie and three former GSE executives, including CEO Franklin Raines.

Both Fannie Mae and Freddie Mac retained their dominant shares of mortgage-backed securities with a bit of a boost during the third quarter of 2012, according to an Inside The GSEs analysis.The two GSEs issued a combined $335.4 billion MBS during the third quarter, compared to $273.9 billion during the previous quarter. Fannie and Freddie saw an ample 54.7 percent increase in MBS issuance during the first nine months of 2012 compared to the same period a year earlier.

The Federal Housing Finance Agency will employ a new, more comprehensive examination rating system which would be used to inspect Fannie Mae, Freddie Mac, the Federal Home Loan Banks and the Banks’ Office of Finance under a final rule issued earlier this month. The new system, published in the Nov. 13 Federal Register, will implement a single risk-focused examination system for all three entities that would be similar to the “CAMELS” ratings used by federal prudential regulators for depository institutions.

The Eleventh Circuit Court of Appeals ruled earlier this month that a 2010 Federal Housing Finance Agency directive advising Fannie Mae and Freddie Mac against purchasing mortgages laden with certain first-priority lien obligations under the Property Assessed Clean Energy program is not tantamount to a rulemaking that can be challenged in court. The ruling rejected a challenge by Leon County, FL, to uphold its PACE program. The county claimed the FHFA had engaged in rulemaking without the required notice and comment period in violation of the Administrative Procedure Act.The circuit court’s opinion by Judge Rosemary Barkett found the Finance Agency’s action was consistent with its congressionally defined role as conservator under the Housing and Economic Recovery Act of 2008.

The Federal Housing Finance Agency’s proposal to levy extra guaranty fee charges on GSE mortgages originated in five slow-foreclosure states attracted nearly universal calls to curtail or even to outright scrap the measure from industry participants and from lawmakers. If implemented as proposed, the FHFA would target Connecticut, Florida, Illinois, New Jersey and New York for an additional, one-shot g-fee of between 15 and 30 basis points in 2013.

Industry groups rallied late this week in opposition to a new effort to use revenue derived from an additional GSE guaranty fee to fund amendments to a jobs bill. H.R. 6429, the STEM Jobs Act, would extend by one year the 10 basis point g-fee increase mandated by Congress last year to pay for an extension in payroll taxes. All of the added revenue from that fee hike, which will remain in effect for 10 years, will go into the U.S. Treasury and not cover Fannie Mae and Freddie Mac credit losses or count toward the GSEs’ other financial obligations.