Bank of America and other large mortgage servicers are seeking a meeting with the Federal Housing Finance Agency to address concerns about the latest version of the Home Affordable Refinance Program for underwater Fannie Mae and Freddie Mac borrowers. Since HARP was first launched in 2009, it has failed to meet expectations. The government quickly expanded the program to include loans with current loan-to-value ratios of up to 125 percent, which accounted for a very small share of business. Under HARP 2.0, which went into effect this month but won’t be fully up to speed until the second quarter of...

Reform of the government-sponsored enterprises is seen as an essential step toward the widespread resumption of non-agency securitization. However, industry analysts suggest that significant action on GSE reform will not begin until after the November 2012 elections. “We are still nowhere close to any legislation that has a realistic possibility of even being enacted,” said Lawrence White, a professor of economics at New York University, at a seminar this week hosted by the American Securitization Forum. “The can will continue to get kicked down the road until after November 2012.” ...

The Federal Housing Finance Agency’s proposal to shift the handling of nonperforming loans to special servicers would not benefit most servicers and borrowers, according to the Mortgage Bankers Association. The proposal could also hinder efforts to shift activity to the non-agency market. In September, the FHFA proposed a fee-for-service compensation model for the government-sponsored enterprises and suggested it could also be applied to the non-agency market. According to the FHFA’s discussion paper, Fannie Mae or Freddie Mac would pay a set dollar fee per performing loan – $10 was cited as an example. For non-performing loans ...

Senate Republicans have threatened to block the confirmation of Carol Galante as head of the FHA until Senate Democrats come up with a plan to deal with Fannie Mae and Freddie Mac. The Senate Committee on Banking, Housing and Urban Affairs this week voted 13 to 9 to send Galante’s nomination to the Senate floor amid Republican calls to reject the nomination. Some Republicans expressed concern over the health of the FHA Mutual Mortgage Insurance Fund, citing a recent independent actuarial study that reported a precarious drop in the fund’s excess capital reserve for unexpected losses. Sen. Jim DeMint, R-SC, said he did not think ...

Private mortgage insurers would play a strategic role under a new Senate proposal for winding down Fannie Mae and Freddie Mac and privatizing guarantees on high-quality mortgage securitizations. Introduced by Sen. Johnny Isakson, R-GA, the Mortgage Finance Act of 2011 would create a new regulatory framework for securitizing “qualified residential mortgages” and an alternative form of guarantee provided by a new Mortgage Finance Agency. Under Isakson’s bill, the two government-sponsored enterprises would be placed in a run-off mode by the Federal Housing Finance Agency 18 months from the date of enactment. They would be required to ...

Republican lawmakers on both sides of Capitol Hill are pushing harder for secondary mortgage market reform legislation as the first session of the 112th Congress moves toward a holiday break. The House Financial Services Subcommittee on Capital Markets and the Government Sponsored Enterprises this week approved legislation aimed at boosting the non-agency mortgage securities market by creating an extensive federal regulatory framework. The bill, approved on a party line vote, does not address the fate of Fannie Mae and Freddie Mac, nor does it provide for any federal backing for...

In the world of federal budget magic, Democrats and Republicans are both looking at increases in Fannie Mae and Freddie Mac guarantee fees as a way to offset the cost of extending payroll tax breaks due to expire at the end of 2011. Both parties so far are rejecting the other party’s proposed solution to keep the tax break, though both bills include nearly identical plans to start raising fees charged by the government-sponsored enterprises. The Senate Democrats’ Middle Class Tax Cut Act of 2011 would start raising GSE guarantee fees by 12.5 basis points per year. The GOP bill in the...

The Inspector General assigned to watch the Federal Housing Finance Agency is “actively investigating” possible fraud in mortgage securitization, loan origination, servicing and loss mitigation activities, the IG said during a hearing in the Senate Banking, Housing and Urban Affairs Committee this week. FHFA Inspector General Steve Linick reiterated observations in his organization’s semiannual report released last week that the FHFA sometimes shows “undue deference” to the government-sponsored enterprises and has not always been as proactive in its oversight as it should have...

There are a slew of metrics that go into the calculation of performance incentives for Fannie Mae, Freddie Mac and their top executives. Some of them – like hitting softball market share targets when the only competition is Ginnie Mae and Freddie Mac – seem hard to miss. For 2010, one of Fannie’s performance goals was to achieve a 33 percent share of new single-family mortgage-backed securities issuance. The company actually attained a 44 percent share of MBS issuance last year, which helped Fannie’s top executives earn 89 percent to 99 percent of their maximum long-term...

Changing how mortgage lenders are paid for servicing Fannie Mae and Freddie Mac loans is ill-advised at this point because servicing requirements themselves are in flux, according to the Mortgage Bankers Association. Adopting the radical fee-for-service proposal advanced by the Federal Housing Finance Agency would be particularly disruptive for a market that’s still under a lot of strain, the industry group said in a letter to the FHFA. The FHFA is collecting industry feedback on reforms to servicer compensation that is now based on a minimum servicing fee paid out of...