The use of Federal Home Loan Bank advances among bank and thrift members fell overall during the first quarter of 2012 with the top three members showing a drop-off substantially larger than the overall industry’s year-over-year rate of decline, according to the Inside Mortgage Finance Bank Mortgage Database. All of the nation’s banks and thrifts used a combined $305.8 billion in advances as of March 31, 2012, down 6.6 percent from the fourth quarter of 2011 and off 14.6 percent from the same period a year earlier. The Federal Home Loan Bank’s Office of Finance in its first quarter combined finance report cited decreased member demand, regular maturities and continuing prepayments for the first quarter decline.

The number of Fannie Mae and Freddie Mac mortgages refinanced through the Home Affordable Refinance Program nearly doubled during the first three months of 2012 compared to the fourth quarter 2011, according to the Federal Housing Finance Agency. The FHFA’s March 2012 Refinance Report, released earlier this month, showed that HARP production skyrocketed 93.4 percent in the first quarter of 2012, to a record 180,185 loans. Fannie’s HARP production jumped 79.8 percent while HARP volume at Freddie was up a whopping 111.1 percent during the three-month period ending March 31, 2012.

The Federal Housing Finance Agency this week proposed to reduce the affordable housing goals for Fannie Mae and Freddie Mac through 2014. The low-income housing goal would be lowered from the current 27 percent to 20 percent, and the very-low-income target would drop slightly, from 8 percent of the government-sponsored enterprises’ business to 7 percent. The Finance Agency has not yet calculated the GSEs’ performance on their 2011 affordable housing goals, although un-verified calculations by both companies show that they missed several targets last year. That was also the case in 2010.

Manhattan District Attorney Cyrus Vance has charged Abacus Federal Savings Bank and a group of its former employees in a massive mortgage fraud scheme for allegedly originating and selling fraudulent mortgage loans to Fannie Mae over a five-year period. The Manhattan-based bank, which provides loans and other banking services in New York City’s Chinatown, as well as 19 former employees, were charged with residential mortgage fraud, securities fraud, grand larceny, conspiracy and falsifying business records. Eleven of the bank’s employees were indicted in state court two weeks ago, while eight waived indictment and admitted guilt, according to the DA’s 184-page indictment.

Mortgage companies reported strong gains in income from loan production and secondary marketing activity during the first quarter of 2012, according to a new Inside Mortgage Trends analysis of earnings reports filed by nine major lenders. Although the servicing business remained profitable during early 2012, income was down slightly from the fourth quarter of last year. All nine companies reported increased earnings on loan production and secondary marketing. As a group, they generated $4.84 billion in income from these activities, up 76.9 percent from...(Includes one data chart)

A working paper authored by two Federal Reserve Bank of New York economists found that refinancing can be “fruitfully employed” as a tool for loss mitigation by investors and lenders. In their paper, “Payment Changes and Default Risk: The Impact of Refinancing on Expected Credit Losses,” Fed economists Joseph Tracy and Joshua Wright found that the relationship between borrowers’ monthly payments and future credit performance is important for the design of an initiative such as the Home Affordable Refinance Program. The authors used a competing risk model to estimate the sensitivity of default risk...

The agency mortgage servicing market continued to grow during the first three months of 2012, although there is some evidence that banks are beginning to pull back from the sector. The Federal Reserve late last week reported that the total supply of home mortgage debt outstanding fell by 0.9 percent during the first quarter. It marked the 16th consecutive quarterly decline since the first quarter of 2008, when the housing market began to crater. The agency estimated that $10.179 trillion of home loans were outstanding at the end of March, the lowest level since...(Includes three data charts)

While modifications through the Obama administration’s Making Home Affordable programs have slowed in pace, the now-implemented “Tier 2” expansion may soon increase activity. New activity in the program was down in every category during the first quarter of 2012, according to an Inside Mortgage Finance analysis of Treasury Department data. The number of new trial modifications fell 9.0 percent from the fourth quarter, while new permanent mods were down 21.2 percent. Because a major servicer in January revised the number of trial mods it had offered since the program began, it’s...(Includes one data chart)

The Federal Housing Finance Agency this week proposed to reduce the affordable housing goals for Fannie Mae and Freddie Mac through 2014. The low-income housing goal would be lowered from the current 27 percent to 20 percent, and the very-low-income target would drop slightly, from 8 percent of the government-sponsored enterprises’ business to 7 percent. The agency has not yet calculated the GSEs’ performance on their 2011 affordable housing goals, although un-verified calculations by both companies show that they missed several targets last year. That was also the case in 2010. In 2010, the...