The Federal Housing Finance Agency this week defended its massive legal action against many of the nation’s largest financial institutions on behalf of Fannie Mae and Freddie Mac over the government-sponsored enterprises’ losses on non-agency mortgage backed security purchases. The Finance Agency contends that 17 financial institutions sold Fannie and Freddie some $196 billion of MBS, mostly between 2005 and 2008, that caused losses to the GSEs for which there should be compensation. Filed late last week in federal and state courts in New York and in federal court in Connecticut, the lawsuits seek damages and civil penalties under... [Includes one data chart]

Experts agree that the federal government plays too big a role in the housing market, but panelists at a Federal Reserve conference last week said there is little consensus on how to fix it. FHA is “not our silver bullet,” observed Janis Bowdler, a director at the National Council of La Raza. “Surely, it’s stepping in while we are in a tight credit market. But it’s no long-term solution.” One problem with FHA is that lenders aren’t required to offer it, which means entire communities are left “credit-starved,” Bowdler said. “This leaves them in the same vulnerable position to predatory lenders that they were in five or six or 10 years ago,” she...

Fannie Mae made its second foray of 2011 into the non-agency MBS market by providing a guarantee wrap on a $690.6 billion deal backed by previously modified FHA and VA mortgages. Government Loan Securitization Trust 2011-FV1 is comprised of government loans originated by Wells Fargo and Wachovia. All the loans were previously securitized in non-agency MBS backed by Fannie wraps, including some that date back to 2001. The average age of the loans since modification is 132 months, and 91.2 percent of them are insured by the FHA. According to the prospectus, 19.8 percent of the loans were 30-days delinquent and 35.9 percent were more than...

The financial crisis and the housing meltdown have cast unprecedented doubt about the virtue of homeownership, and many experts at a conference sponsored this week by the Federal Reserve acknowledged that homeownership has lost its universal appeal. “For low-income households I do think it’s more risky because it’s such a large share of their assets, such a large share of the wealth, so a price decline has a disproportionate effect,” explained Karen Pence, assistant director of the division of research and statistics for the Fed. “I think it’s more risky for low-income households just because it’s such a big part of their portfolio. I think it’s...

The Federal Housing Finance Agency this week became among the latest, most influential parties to legally weigh in on the proposed $8.5 billion Bank of America settlement over non-agency mortgage-backed securities.On Aug. 30, the deadline to file objections to the deal, the Finance Agency filed a “Notice of Appearance and Conditional Objection” with the U.S. District Court in Manhattan on behalf of Fannie Mae and Freddie Mac.

The Federal Home Loan Bank system has requested that federal regulators clearly and unambiguously exempt the FHLBanks’ long-standing mortgage purchase programs from the government’s emerging risk-retention rule on securitization.In comments submitted to regulators last month on the interagency proposed rule, the 12 FHLBanks signed a joint letter to ensure the Banks’ Acquired Member Assets programs will be exempt under the final rule.

Default technology provider Commerce Velocity, based in Irvine, CA, recently upgraded its Optimizer solution to help servicer clients achieve the new requirements for Fannie Mae’s Quality Right Party Contact initiative. The original version of Optimizer enabled servicers to maximize cash flows from delinquencies, and enforce workout consistency throughout the default management process. By applying net present value calculations, cash flow projections, valuation models, and comprehensive workout guidelines, the technology provides “the most intelligent outcomes possible,” the company said. The Optimal Outcome module monitors...

The Federal Housing Finance Agency needs to tweak its proposed eligibility certification form for prospective directors of the 12 Federal Home Loan Banks, according to comments received by the Finance Agency.

Debt issuance for Fannie Mae, Freddie Mac and the Federal Home Loan Banks rose during the second quarter of 2011, while Freddie recorded a decline in new debt during the April to June period.The GSEs collectively issued $726.2 billion in new debt during the second quarter, a 2.6 percent increase from the previous quarter, while GSE debt outstanding at $2.168 trillion declined 4.8 percent from the first quarter.

The government will subsidize Fannie Mae and Freddie Mac new business to the tune of about $51.0 billion over the next 10 years, according to the latest projections from the Congressional Budget Office.CBO’s most recent budget and economic outlook, released in late August, increased its estimate of the subsidy cost for the two GSEs during the period between 2012 to 2021 from the approximate $41.6 billion that the CBO forecast in June.