The bipartisan legislation to replace Fannie Mae and Freddie Mac that’s taking shape in the Senate would leverage key reform projects already underway at the government-sponsored enterprises, but it doesn’t tackle some of the key transition issues the market would face by putting the GSEs out of business. The reform plan being put together by Sens. Bob Corker, R-TN, and Mark Warner, D-VA, has at its core the risk-sharing projects currently being designed by the GSEs, according to a copy of the draft legislation provided to Inside MBS & ABS. The Secondary Mortgage Market Reform and Taxpayer Protection Act of 2013 would also implement the common securitization platform that Fannie and Freddie are building under the direction of the Federal Housing Finance Agency. The legislation would put...

Fannie Mae and Freddie Mac out of existence, the two GSEs aren’t going anywhere for the near-future, say industry observers. Two bills – one by a Republican GSE hawk filed two weeks ago, the other a bipartisan proposal soon to be submitted that would wind down and replace Fannie and Freddie over a period of 5 to 10 years – have cranked up the volume of chatter about the prospects of GSE reform on Capitol Hill. Don’t hold your breath because nothing has changed, according to financial industry consultant Bert Ely.

A new financing program for home energy retrofits that leverages home equity is gaining popularity among California homeowners despite efforts by the Federal Housing Finance Agency to discourage lenders from offering such products. Called the HERO program, the initiative was developed jointly by West Riverside Council of Governments and Renovate America, a San Diego-based company that works with local governments in designing low-cost financing programs for home and business owners that want to ...

When Fannie Mae and Freddie Mac were placed in government conservatorships in September 2008, roughly 600 banks and thrifts saw $8 billion of their preferred stock investments in the two GSEs evaporate. With both firms now wildly profitable, there is increasing hope and speculation that buyers of the “junior” preferred stock are in for an eventual payday. No one is more optimistic about that happening than the Independent Community Bankers of America. For the ICBA, the question boils down to how much on the dollar its members will receive for the shares they still own. It’s also a complicated question. When Fannie and Freddie hit the skids at the nadir of the housing bust, many banks and thrifts sold their preferred shares at market rates, that is, at something close to zero. In other words, they no longer have the stock certificates and any ownership rights. Speculators and bottom feeders do.

As Fannie Mae’s and Freddie Mac’s portfolios wind down, the two GSEs should maintain sufficient balance sheet space to allow for the aggregation of loans from smaller lenders who are not yet ready to securitize, according to the Mortgage Bankers Association. The MBA’s “concept paper” released this week also calls for the Federal Housing Finance Agency common securitization platform initiative to include plans for the acceptance of small lot deliveries into multi-lender pools.

Fannie Mae and Freddie Mac mortgage-backed securities remained the preferred investment choice of the 12 Federal Home Loan Banks during the first quarter of 2013, with a negligible decrease from the previous quarter, while a number of FHLBanks indicated no plans to sell the riskier non-agency MBS in their portfolios. A new analysis and ranking by Inside The GSEs based on data from the Federal Housing Finance Agency found overall MBS investments for the dozen FHLBanks declined 1.0 percent to $137.14 billion between the fourth and first quarters. However, non-agency MBS, which made up 18 percent of the total FHLBank system’s share of MBS during the first three months of this year, fell to $24.69 billion as of March 31, 2013. This was down 2.9 percent from the fourth quarter of 2012 and down 13.5 percent from $28.52 billion from the same period a year ago.

Organizers behind a recently filed White House petition are calling for the government to “restore fairness” to Fannie Mae and Freddie Mac common shareholders. Created on June 1, the petition posted on the White House website calls for Congress, the Treasury Department and the Federal Housing Finance Agency, to enact a method “to provide fairness and protection” to common shareholders of the two GSEs “and enable shareholders to have participation in the recovery of the value of their stock.” GSE common shareholders became entangled in a financial limbo of sorts when Fannie and Freddie were placed into government conservatorship under the FHFA in September 2008.

The nomination of Rep. Mel Watt, D-NC, by President Obama to be the new director of the Federal Housing Finance Agency is considered a “long shot” on Capitol Hill, but the distinct lack of enthusiasm by both supporters and detractors of the nominee means anything could happen, say industry observers. Despite the vocal support of progressives, especially advocates of principal reduction of GSE-held loans, Watt’s nomination to replace FHFA Acting Director Edward DeMarco is far from a sure thing, according to analysts at Compass Point Research & Trading. “We remain pessimistic regarding Rep. Watt’s nomination,” said Compass Point.

The Federal Housing Finance Agency last week directed Fannie Mae and Freddie Mac to extend both the Home Affordable Modification Program and their streamlined modification initiative until 2015. The move was in concert with actions by the Treasury Department and the Department of Housing and Urban Development. Both agencies said they would extend HAMP for non-Fannie and Freddie loans, but the FHFA’s directive makes the extension applicable to loans owned or guaranteed by the GSEs.“These extensions keep two valuable foreclosure prevention programs available to those who need them,” said FHFA Acting Director Edward DeMarco. “The extensions also align the end date for three key assistance programs that were developed in response to the housing crisis.”

Seller/servicers doing business with Freddie Mac will be charged a so-called low-activity fee for not meeting new quotas for loan deliveries and mortgage servicing beginning next year, according to a recent policy change announced by the GSE. Freddie said it will assess lenders a fee of $7,500 if they fail to deliver mortgage loans with an aggregate principal balance of more than $5 million or service mortgages for the GSE with an aggregate balance of at least $25 million. Freddie will begin monitoring loan sales and servicing beginning this year and imposing the low-activity fee on slackers beginning January of next year.