The Federal Housing Finance Agency is currently pondering how, or whether, the GSE conservator will intervene in the controversial and ever more contentious proposal to use local eminent domain laws to effect principal reduction for homeowners by seizing mortgage loans. Early last month, the FHFA cited “significant concerns” about the eminent domain proposals, warning that “action might be necessary” on its part to avoid a risk to the safe and sound operations of Fannie Mae and Freddie Mac, as well as to avoid taxpayer expense. Some 74 organizations and members responded to FHFA’s request for input and submitted comment letters. “The acting director will consider the input received in making a final decision,” said a Finance Agency spokesman.

Fitch Ratings said it has affirmed the ‘AAA’ long-term issuer default rating and support floors of the Federal Home Loan Bank of Atlanta.Fitch noted that as a GSE, the Atlanta Bank’s IDRs are linked to the U.S. sovereign rating. “FHLBank Atlanta has historically benefited from its affiliation with the U.S. government and its current IDRs and outlook benefit from the implicit support that it receives,” said the rating agency. “Fitch believes that implicit sovereign support for the FHLBank system would be forthcoming due to its important mission as it pertains to homeownership, serving as a source of liquidity to its members and the wide global distribution of FHLBanks debt.”

Some three years after it was first declared to be on fiscal thin ice, the Federal Home Loan Bank of Seattle took a big step toward firmer financial ground earlier this month. The Federal Housing Finance Agency, which regulates the 12 FHLBanks, reclassified the Seattle Bank as “adequately capitalized,” allowing it to move forward with plans to repurchase excess capital stock for the first time since December 2008. “Even though this initial repurchase amount is relatively small, it is a significant milestone in our return to normal operations,” explained FHLBank of Seattle President and CEO Michael Wilson in a letter to members.

The new “framework” governing Fannie Mae and Freddie Mac repurchase demand activity may have a relatively modest impact on an issue that has been a major factor in the mortgage market over the past few years. Analysts suggest that lenders will be cautious about changing origination strategies that have focused on minimizing buyback risk until they see how the government-sponsored enterprises implement the new policy. Many observers remain concerned about how the GSEs will respond to ongoing pressure from their regulator – and the Office of the Inspector General – to ...

House Republicans this week made a surprise effort to advance a forgotten GSE reform bill with nominal bipartisan support directly to the House floor. It’s unclear whether the effort will succeed but an industry lobbyist says the move was an exercise in futility nonetheless. H.R. 2440, the Market Transparency and Taxpayer Protection Act, from Rep. Robert Hurt, R-VA, was one of more than two dozen “suspension” bills added to the lineup of expected quick and easy votes. In the House, suspension of the rules is a procedure generally used to quickly pass non-controversial bills. H.R. 2440 had not been advanced for a vote as Inside The GSEs went to press.

The Federal Housing Finance Agency’s official watchdog is advising the regulator to apply greater scrutiny to Fannie Mae as it works on a “promising initiative” to shift poor performing GSE loans to more capable financial institutions. This week’s report by the FHFA’s Office of Inspector General found little fault with a controversial transaction last summer between Fannie and Bank of America under the GSE’s High Touch Servicing Program. However, the OIG concluded that there was room for improvement in the FHFA’s and Fannie’s supervision of the program.

The new representation and warranty framework for GSE loans announced last week by the Federal Housing Finance Agency will go far to providing a clearer picture of prospective putbacks on loans delivered to the GSEs starting next year but more is needed, analysts conclude. At the FHFA’s direction, Fannie Mae and Freddie Mac are implementing a new rep and warrant framework for all conventional loans funded, acquired, securitized or guaranteed on or after Jan. 1, 2013. The new framework places greater emphasis on quality control review processes to be applied when the loans are delivered to the GSEs earlier in the loan process and improves the clarity around repurchase requests, noted Fitch Ratings.

The Federal Housing Finance Agency’s Office of Inspector General reported last week that Freddie Mac will increase its repurchase requests to between $0.8 billion and $1.2 billion this year and between $2.2 billion and $3.4 billion overall following its review of the GSE’s settlement agreement with Bank of America in January 2011. A year ago the OIG took the FHFA to task for approving what the IG considered a lowball $1.35 billion agreement from BofA to Freddie to settle current and future repurchase claims.

Fannie Mae and Freddie Mac late last week announced another round of changes in the Home Affordable Refinance Program for underwater borrowers, including more liberal repurchase standards that some say may spur lenders to refinance other servicers’ loans. For HARP loans sold to the government-sponsored enterprises on or after Jan. 1, 2013, repurchase risk will be lowered if the borrower stays current in the loan for 12 months. Under a revised repurchase policy announced last week, representation and warranty risk will be eased for non-HARP loans that stay current for 36 months. Effectively immediately, the government-sponsored enterprises reduced...

Fannie Mae and Freddie Mac support the Consumer Financial Protection Bureau’s proposal to institute a higher “all in” annual percentage rate calculation that would incorporate additional fees and charges – one aspect of the larger proposed rule to combine and simplify the consumer mortgage disclosure under the Truth in Lending Act and the Real Estate Settlement Procedures Act. “Fannie Mae and Freddie Mac support the bureau’s proposal to expand the finance charge for several reasons,” the two government-sponsored enterprises said. “First, it will make comparison shopping easier for consumers by eliminating the lack of clarity that now leads creditors to treat identical fees differently.” Second, a more inclusive finance charge will eliminate...