The Federal Housing Finance Agency needs to do more to oversee the legal expenses of Fannie Mae and Freddie Mac, though it has limited tools at its disposal to curtail GSE litigation, according to the FHFA’s Office of Inspector General. The OIG’s report, issued this week, noted that the two GSEs have racked up a significant number of billable hours, both before and after being placed in government conservatorship in September 2008, for their defense in lawsuits, investigations and administrative actions.

The massive legal action initiated by the Federal Housing Finance Agency last year on behalf of Fannie Mae and Freddie Mac against many of the nation’s biggest lenders is getting ready to face its first legal challenge, and the federal judge’s ruling will determine the scope and direction of the cases, experts say. The FHFA lawsuits seek tens of billions of dollars in damages for losses incurred by Fannie and Freddie on purchases of approximately $200 billion in residential mortgage-backed securities.

A Federal Home Loan Bank may base its calculation of tangible capital for an insurance company member on financial statements prepared using statutory accounting principles for purposes of applying regulatory limits to members’ access to advances, according to the Federal Housing Finance Agency. The FHFA’s regulatory interpretation, issued earlier this month, would permit the use of SAP-based financial statements under certain conditions if the Bank’s insurance company member does not otherwise prepare financial statements based on generally accepted accounting principles.

With Congress unlikely to move major mortgage finance reform any time soon, the Federal Housing Finance Agency this week outlined its “strategic plan” to use the next phase of the conservatorships of Fannie Mae and Freddie Mac to build a new mortgage securitization infrastructure. The plan’s roll out comes one year and one week after the Obama administration proposed three potential options to shut down Fannie and Freddie within 10 years. No significant action has been taken since, although Treasury Secretary Timothy Geithner recently noted that the White House expects to provide more details of its...

The Consumer Financial Protection Bureau’s first official budget – which will be funded by the Federal Reserve – segregates expenditures into three buckets, the lion’s share of which will go to the supervision, enforcement, fair lending and equal opportunity account. Outlays within this category are set to out-step the other two categories combined. After spending about $60 million in fiscal 2011, this SEFLEO bucket is set to climb to about $214 million for 2012 and $261 million next year. Consumer-related expenditures totaled $43 million in 2011 and are projected to roughly double ...

The Multi-State Mortgage Committee and the American Association of Residential Mortgage Regulators have issued Secure and Fair Enforcement for Mortgage Licensing Act (SAFE) Act Examination Guidelines for use by state nondepository mortgage regulators. The primary purpose of the guidelines is “to ensure that all individuals acting as mortgage loan originators are properly licensed and registered under the SAFE Act in all states in which they are conducting business,” said John Ducrest, commissioner of the Louisiana Office of Financial Institutions and chairman of the ...

The securitization industry told the Securities and Exchange Commission this week that certain rules might be needed to make sure transaction parties are not creating and selling ABS that are intentionally designed to fail or default and profiting from the failure or default of such securities. However, industry representatives urged the regulator to make sure that any such rules not be overly broad or vague or place undue restrictions or prohibitions upon the securitization market and otherwise impair its recovery. The SEC in September proposed a rule to implement provisions...

Excluding streamlined FHA refinancing from the “Compare Ratio” loan review process to facilitate refinancing of underwater non-agency mortgages, as proposed by the Obama administration, would make sense. At the margin, however, the proposal would increase Ginnie Mae prepayment speeds on higher-coupon borrowers, analysts cautioned. The proposal is part of a broader administration plan for housing recovery, which calls on Congress to provide non-agency borrowers with access to low-cost refinancing through FHA, and fully streamlined refinancing for borrowers with Fannie Mae or Freddie Mac loans. Underwater borrowers who opt for streamlined refinancing in either agency or non-agency programs would have ... [one data chart]

In an unusual legal development, the City of St. Paul, MN, late last week suddenly removed its challenge in a case before the Supreme Court of the United States that could have produced a definitive ruling on the disparate impact theory of lending discrimination under the Fair Housing Act. What’s unusual in Magner v. Gallagher is that the city believes it would have prevailed in the nation’s highest court – but opted to ask for dismissal because city leaders came to the conclusion that a victory could substantially undermine important civil rights enforcement in housing throughout the nation. The city expects to...

The Federal Housing Finance Agency’s own data prove that reducing the principal owed on underwater Fannie Mae and Freddie Mac loans would actually save taxpayers money, contrary to the agency’s position that writedowns are against taxpayer interests, according to House Democrats. In a letter last week to FHFA Acting Director Edward DeMarco, Reps. Elijah Cummings, D-MD, and John Tierney, D-MA, labeled the agency’s report justifying its policy against principal reduction as “seriously deficient and misleading.” “We understand that the FHFA is not part of the Obama administration, and that you do not take...