Lawmakers on both sides of the aisle and both chambers of Congress are warming up the hot seat next week for the man in charge of the conservatorships of Fannie Mae and Freddie Mac as they demand answers following the firestorm surrounding bonus payments for top GSE executives.In advance of what is expected to be a heated set of hearings, Federal Housing Finance Agency Acting Director Edward DeMarco dispatched a letter to lawmakers late this week to provide his perspective after approving $12.8 million in bonuses for 10 Fannie and Freddie executives.

The Federal Home Loan Bank Office of Finance announced that preliminary combined net income for the FHLBanks rose 86.9 percent to $469 million for the three-month period that ended Sept. 30, 2011. That was down from $732 million at the end of the third quarter 2010.For the first nine months of the year, the FHLBanks earned $1.08 billion, $305 million less than the Banks earned during the same time last year. The Office of Finance attributed the changes to lower net interest income, partially offset by other non-interest losses and lower assessments.

The Federal Home Loan Bank system-wide minimum collateral-to-advances coverage ratio was 129 percent at year-end 2010, a 20 percentage point decrease from year-end 2009.The FHFA’s annual Report on Federal Home Loan Collateral Securing Advances – prepared for the Senate Committee on Banking, Housing and Urban Development and the House Financial Services Committee – analyzes, among other things, the ratios of subprime and nontraditional collateral to the total collateral.

A bill that would create a legislative framework for a covered bond market in the U.S., as well as a potential competitor for the Federal Home Loan Bank system, was introduced this week in the Senate, a counterpart to a long-standing covered bond bill awaiting final approval in the House.The United States Covered Bond Act, S. 1835, sponsored by Sens. Kay Hagan, D-NC, and Bob Corker, R-TN, is nearly identical to a House bill of the same name sponsored by Rep. Scott Garrett, R-NJ, and Carolyn Maloney, D-NY, H.R. 940.

Fannie Mae and Freddie Mac each lost much more in the third quarter of 2011 than during the previous three month period and more than one year ago as the two GSEs reported significant derivatives losses.On a combined basis, Fannie and Freddie lost $9.5 billion in the third quarter, compared to a $5.0 billion loss in the second quarter and $3.8 billion in losses during the same period a year ago.

It will be months rather than weeks before the Federal Housing Finance Agency and other government departments are ready to deploy a plan for bulk sales of the inventory of government-owned foreclosed properties, according to the head of the FHFA.Testifying before the House Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises last week, FHFA Acting Director Edward DeMarco told members that with the long-awaited revision of the Home Affordable Refinance Program out of the way, focusing on the government’s ample real estate owned inventory is the “next priority.”

Congress should permit the conforming mortgage loan limits for Fannie Mae, Freddie Mac and the FHA to remain lower as attempts to restore the higher limit could do the mortgage market more harm than good, an expert says.The “emergency” high cost conforming loan limits enacted in 2008 for the GSEs and the FHA expired on Sept. 30, dropping the limit to $625,500 from $729,750.

A bill introduced in the Senate this week would “responsibly unwind” Fannie Mae and Freddie Mac and “end the dependence on the government for housing finance.” Sen. Bob Corker, R-TN, said he introduced the Residential Mortgage Market Privatization and Standardization Act to start a conversation on how to best to rebuild the mortgage finance market.

Many mortgage lenders are concerned about a new fee-for-service compensation plan proposed by Fannie Mae, Freddie Mac and their federal regulator – including a change in how servicers get their fees. Under the current minimum servicing fee system, servicers take their slice of compensation out of the interest payments being passed through from borrowers to the government-sponsored enterprises. Under the proposed fee-for-service plan, servicers would pass through the entire consumer payment and then get their compensation from the GSEs. Beyond the economics of the proposed change – servicers would get a flat fee, perhaps...