Although the Federal Housing Finance Agency has taken steps to ensure that the GSEs’ mortgage purchases conform to certain underwriting standards, the Finance Agency’s oversight of underwriting standards is limited and requires more attention, the FHFA’s official watchdog concluded this week. The FHFA’s Office of Inspector General found in its audit of FHFA oversight of Fannie Mae’s single-family mortgage underwriting standards that the agency lacks a formal process for reviewing underwriting standards and variances. Instead, it informally reviews and comments on Fannie’s proposed credit policy changes.

The Federal Housing Finance Agency has announced its roadmap for managing its conservatorship of Fannie Mae and Freddie Mac as it moves toward its ultimate end of reducing GSE market share and building a new secondary mortgage market infrastructure. Two weeks ago, the FHFA rolled out its 2012 “conservatorship scorecard,” which provides more details about the Finance Agency’s revamped strategic plan that was announced last month.

Fannie Mae, Freddie Mac and the Federal Home Loan Banks will now be prohibited from taking on mortgages “encumbered by certain types of transfer fee covenants and in certain related securities” under a final rule issued last week by the Federal Housing Finance Agency. The FHFA’s final rule, published in the March 16 Federal Register, generally applies, with some exceptions, to private transfer fee covenants created on or after Feb. 8, 2011, the publication date of the Finance Agency’s proposed rule.

The recent Servicing Resolution Agreements signed by the nation’s top five mortgage servicers with the federal government and state attorneys general may have been clear on the cost of their key provisions but it is the enormous hidden costs of compliance that could bite the financial institutions in the long run, according to compliance experts. Following the recent announcement of the national servicing settlement, it is impossible to put an accurate dollar amount on the myriad things servicers need to do in order to comply, but experts agree that staffing, training, technological upgrades...

Buried in the fine print of the $25 billion nationwide servicing settlement is a small incentive for the five banks if they agree to waive their right to seek deficiency judgments against distressed borrowers. The five servicers agreed to make some $17 billion in loan modifications and refinances, but they meet those obligations by racking up “credits” for a long list of actions. For every dollar of principal reduction made on a portfolio mortgage with a loan-to-value ratio under 175 percent, for example, they get a dollar of credit toward their obligation. The agreement gives them credit for...

A Senate subcommittee chairman has called upon the Federal Housing Finance Agency to recalculate and resubmit its principal reduction analysis to account for the Obama administration’s proposed enhanced incentives after an expert testified last week about a number of flaws in the study the FHFA used to justify its policy stance against writedowns of Fannie Mae and Freddie Mac loans. Sen. Robert Menendez, D-NJ, called for the FHFA do-over during a hearing of the Senate Banking Subcommittee on Housing Transportation and Community Development, where Amherst Securities’ Laurie Goodman said there...

The feds aren’t done cracking down on mortgage servicers and before the smoke clears, more than a half dozen companies are going to be facing fines that have been pending since federal regulators announced their servicing consent decrees last April, an official from the Federal Reserve told members of Congress this week. Last month, the Fed announced it had assessed monetary sanctions totaling $766.5 million against Ally Financial, Bank of America, Citigroup, JPMorgan Chase and Wells Fargo for failing to appropriately oversee their subsidiaries’ mortgage loan servicing and foreclosure processing...

Nearly half of the money spent by Fannie Mae and Freddie Mac at the 2011 annual convention of the Mortgage Bankers Association was of questionable value, according to a new report by the Inspector General of the Federal Housing Finance Agency. The two government-sponsored enterprises spent a total of $600,000 at the MBA annual convention last year, the IG said. That included $140,000 in MBA sponsorships and $140,415 in business meals and hosted dinners. Freddie paid $80,000 for “Platinum” level sponsorship at the event, and Fannie paid $60,000 to be listed as a “Gold” sponsor. The tangible benefits include...

By the end of 2012, the Federal Housing Finance Agency will see a plan for a new mortgage securitization platform as a key component in its strategic plan for the conservatorships of the two government-sponsored enterprises, even as analysts warn that transferring credit risk from the GSEs to private investors is fraught with hazard. Late last week, the FHFA unveiled a new “conservatorship scorecard” that provides more details about the agency’s revamped strategic plan for a post-Fannie and Freddie secondary market. “It’s important to see the scorecard itself as further evidence of our commitment to the work...

The Depository Trust & Clearing Corp. announced this week that its Fixed Income Clearing Corp. subsidiary will begin functioning as a new central counterparty, or CCP, designed to reduce risk and costs in the $100-trillion-a-year market for U.S. MBS, starting in April, following the Securities and Exchange Commission’s approval of the proposal. Company officials say the CCP will guarantee settlement of all matched MBS trades, which industry representatives see as a crucial step for the securities industry where the settlement of an MBS trade often does not take place until months after the trade itself was made...