The official watchdog of Fannie Mae and Freddie Mac’s government regulator announced last week it will conduct a “proactive audit and evaluation strategy” of the two government-sponsored enterprises’ real estate owned management policies, as well as the REO oversight efforts of the Federal Housing Finance Agency. “FHFA has a crucial responsibility to ensure that the enterprises manage their REO inventories so as to minimize costs and mitigate the negative effects that foreclosed properties can have on the communities in which they are located,” said the Office of the Inspector General. “Given the...

The Federal Housing Finance Agency should address Fannie Mae and Freddie Mac’s representation and warranties repurchase demands with an eye toward making the two government-sponsored enterprises’ buyback policies more transparent, industry groups say. The volume of repurchase demands by the GSEs continues at “unprecedented levels” as Fannie and Freddie made nearly $100 billion in repurchase demands over the past three years, the Mortgage Bankers Association said in a comment letter on the FHFA’s strategy for GSE conservatorship. “MBA supports lender reps and warrants as an effective method of...

Fannie Mae, Freddie Mac and the FHA generated a record $28.79 billion in conforming jumbo business – mortgages with loan amounts exceeding $417,000 – during the first three months of 2012, according to a new Inside Mortgage Finance analysis of loan-level data. The surge in agency jumbo production – up 34.7 percent from the fourth quarter – exceeded the 14.1 percent jump in overall Fannie, Freddie and FHA business. Conforming jumbo loans accounted for 7.5 percent of the $384.83 billion in securitization and mortgage insurance business done by the agencies in the first...(Includes three data charts)

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...

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)

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.

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.

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.