The ongoing debate over the need for a government guarantee to sustain the benefits of the to-be-announced MBS market moved this week to the Senate Housing, Banking and Urban Development Committee, where researchers covered both sides of the issue for a group of lawmakers who aren’t likely to act on their counsel any time soon. “Proponents of privatization ignore that the jumbo market does benefit from a government guarantee indirectly in multiple ways,” said Adam Levitin, professor of law at Georgetown University. “The jumbo market has long aped the standards set by the [government-sponsored enterprises] in the conforming market, including...

The efforts of the White House, in concert with the Federal Housing Finance Agency, to jumpstart the underperforming GSE refinance program is almost certain to disappoint when final details are made public, due in no small part to overpromised and inflated expectations, say mortgage market watchers.FHFA Acting Director Edward DeMarco said his agency is “carefully reviewing” the two-year old Home Affordable Refinance Program with the White House in order to help a greater number of underwater Fannie Mae and Freddie Mac borrowers into lower-rate loans.

Fannie Mae and Freddie Mac mortgage-backed securities continued to be the preferred investment option for the Federal Home Loan Banks during the second quarter of 2011 with only a paltry decrease from the previous quarter, according to a new analysis and ranking by Inside The GSEs based on data provided by the Federal Housing Finance Agency.Ginnie Mae securities, meanwhile, continued to grow in popularity within the FHLBank system during the quarter.

The chairman of the House Oversight and Government Reform Committee announced late this week that he has opened an investigation into a reported deal struck last month in which Fannie Mae agreed to buy some of Bank of America’s home-loan portfolio.In a letter sent to Federal Housing Finance Agency Acting Director Edward DeMarco, Rep. Darrell Issa, R-CA, requested the FHFA provide the committee documents and a “full explanation of the agency’s decision-making process” regarding the purchase.

The massive legal action that the Federal Housing Finance Agency has initiated against many of the nation’s big lenders on behalf of Fannie Mae and Freddie Mac needs to be resolved forthwith, says an industry attorney, before a prolonged litigation “feeding frenzy” and resulting uncertainty paralyze mortgage market participants.Two weeks ago, the Finance Agency filed legal papers contending that the 17 financial institutions which sold Fannie and Freddie $196 billion of mortgage-backed securities, mostly between 2005 and 2008, duped the GSEs into buying tens of billions of dollars of MBS that went south after the housing bubble burst.

Fannie Mae and Freddie Mac are reportedly in talks with the Securities and Exchange Commission to settle claims that the two GSEs failed to disclose to investors the companies’ exposure to risky subprime mortgages prior to the 2008 housing market crash.

A group of three dozen lawmakers from both parties have issued a last-ditch appeal to House appropriators to take action to extend the temporarily increased conforming loan limits that are set to expire at the end of this month. Unless Congress intervenes, the “emergency” high cost conforming loans limits that were enacted in 2008 for Fannie Mae, Freddie Mac and the FHA will expire on Oct. 1.

Two Ohio pension funds have filed suit in federal court against the Federal Housing Finance Agency to overturn a recent Finance Agency rule that could curtail any award for damages the funds might someday receive in their securities fraud suit against Fannie Mae. In papers filed in the U.S. District Court, District of Columbia, lawyers for the Ohio Public Employees Retirement System and the State Teachers Retirement System of Ohio disputed a final rule issued…

Mortgage lending to finance home purchases increased a hefty 32.2 percent from the first quarter to the second quarter of 2011, helping to offset a huge drop in refinance activity. Housing sales jumped 43.6 percent during the second quarter, although the housing market in 2011 is still considerably slower than it was a year ago. Conditions looked better in the second quarter largely because the first quarter of 2011 was one of the worst on record for housing sales and home-purchase lending. Fewer than 1 million new and existing home sales were reported during the first quarter of 2011, yielding a record low of just... [Includes two data charts]

The Senate Banking, Housing and Urban Affairs Committee may not be moving any closer to a decision on reforming the mortgage finance system, but lawmakers should be getting well versed in the various analytic perspectives on the role of the federal government. At a hearing this week, the committee heard testimony from researchers who support winding down Fannie Mae and Freddie Mac as soon as possible and others who say private capital won’t be drawn back into the system unless there is a government guarantee. “There’s absolutely no reason to believe that private capital would immediately step-up – even if it would eventually...