The Government Accountability Office has cited “opportunities for improvement” in the Federal Housing Finance Agency’s internal controls in a recent report, including a still pending recommendation to beef up the FHFA’s information security controls. Mandated by the Housing and Economic Recovery Act of 2008, the GAO said its audit of the Finance Agency’s fiscal years 2011 and 2010 revealed that the FHFA had not fully implemented its information security program as per GAO’s recommendations in previous reports, resulting in “several new information systems vulnerabilities” over the last year.

In a move intended to maintain the integrity of data that helps guide the decisions of MBS investors, the Financial Industry Regulatory Authority last week fined Citigroup Global Markets $3.5 million for allegedly providing “inaccurate mortgage performance information, supervisory failures and other violations” in connection with subprime residential MBS. “Citigroup posted data for its RMBS deals that it should have known was inaccurate; and even after they learned that the data was inaccurate, Citigroup did not correct the problem until years later,” said Brad Bennett, FINRA executive vice president and...

The government’s multi-billion dollar investment bailout of Fannie Mae and Freddie Mac allowed the two government-sponsored enterprises to avoid an insolvency that could have triggered the collapse of the U.S. housing finance system, concluded a new report by the official watchdog of the GSEs’ regulator. The Federal Housing Finance Agency’s Office of Inspector General’s report – “Fannie Mae and Freddie Mac – Where the Taxpayers’ Money Went” – noted that the U.S. Treasury had dropped some $185 billion into the two GSEs since early September 2008 through the end of last year. “The enterprises’ shareholders lost...

The Securities and Exchange Commission has given Royal Bank of Canada the green light to issue residential mortgage covered bonds registered in the U.S. The SEC granted permission through a no-action letter shortly after RBC submitted plans for a program through which covered bonds backed by U.S. home loans will be offered to U.S. investors. RBC is a “foreign private issuer” under U.S. securities laws and, as a Form S-3 issuer, has a registered shelf with the SEC through which it can offer multiple securities on an immediate, continuous or even on a delayed basis. Covered bonds are debt securities backed by cash...

The “scalability” of the nation’s 12 Federal Home Loan Banks as well as their demonstrated ability to access global markets could play a significant role in their favor as policymakers ponder the future of the FHLBank System in a post-Fannie Mae and Freddie Mac housing market, the FHLBanks’ chief regulator told bank directors and executives last week. During a speech at the annual Federal Home Loan Banks Directors Conference in Washington, DC, Federal Housing Finance Agency Acting Director Edward DeMarco noted the banks already have strong relationships, including a cooperative ownership structure, with their nearly 8,000 front-line local lenders.

Freddie Mac’s new chief executive is expected to have his work cut out for him when he takes possession of the company’s corner office starting next week, industry insiders say, as it remains to be seen how much of a change agent anyone serving as CEO under government conservatorship can be.Last week, Freddie’s board of directors announced, with Federal Housing Finance Agency consent, the appointment of Donald Layton as CEO and elected him a member of the board.

The Federal Housing Finance Agency is still mulling over accepting principal reduction payments from the Treasury Department even as the debate between the factions for and against GSE loan writedowns is quickly dissolving into a partisan food fight. This week, two ranking House Republicans urged FHFA Acting Director Edward DeMarco to stand fast against mounting political pressure directed at him by the Congressional allies of the Obama administration as House Democrats took the gloves off, accusing the Finance Agency of falsely withholding pertinent information about the agency’s principal reduction analysis.

The ongoing feud between Congressional Democrats and the Federal Housing Finance Agency appeared to boil over this week as the FHFA’s head answered back to charges that he’s been holding back pertinent information about the agency’s analysis of principal reductions. In a May 1 public letter to FHFA Acting Director Edward DeMarco, Reps. Elijah Cummings, D-MD, and John Tierney, D-MA, accused the agency head of playing fast and loose with the facts regarding a previously unreported 2010 Fannie Mae pilot program to forgive a borrower’s mortgage debt, as well as the facts buttressing the FHFA’s position...

The Federal Open Market Committee left key federal funds rates unchanged at its latest meeting this week, and continued its agency debt and MBS reinvestment policies, with no sign on the horizon of a change any time soon. “The committee is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency MBS in[to] agency MBS and of rolling over maturing Treasury securities at auction,” the FOMC statement said. “The committee will regularly review the size and composition of its securities holdings and is prepared to...(Includes one data chart)

The Securities and Exchange Commission gave a thumbs-up last week to some changes to the rules governing the to-be-announced market proposed by the Financial Industry Regulatory Authority to increase transparency in agency pass-through MBS transactions. The new changes will institute clear requirements for more timely reporting of two subsets of MBS TBA transactions – those that are “for good delivery” (GD) and those that are “not for good delivery” (NGD) – and include some information that has not been publicly disclosed before. The intent of the changes is to improve the ability of investors to...