In an unusual move, the federal judge overseeing the Federal Housing Finance Agency’s massive legal action against many of the nation’s biggest MBS issuers has granted a defendant the right to appeal her denial of its motion to dismiss. Last week, Judge Denise Cote of the U.S. District Court for the Southern District of New York granted permission to UBS Americas to go over her head to the U.S. Court of Appeals for the Second Circuit. UBS hopes the appellate court will reverse...

Despite indications of heightened risk that the Federal Housing Finance Agency initially missed, the Federal Home Loan Banks substantially increased their unsecured lending to foreign financial institutions in 2010 and 2011, particularly in Europe, according to a report issued this week by the FHFA’s official watchdog. The FHFA’s Office of Inspector General noted that unsecured lending by the FHLBanks swelled from $66 billion at the end of 2008 to more than $120 billion by early 2011, but declined sharply by year-end 2011, as the European sovereign debt crisis continued to worsen.

The Federal Housing Finance Agency should “expeditiously finalize” its long-awaited analysis as to whether Fannie Mae and Freddie Mac will be allowed to offer principal forgiveness modifications under the Treasury Department’s Home Affordable Modification Program, according to the Government Accountability Office. In a report issued late this week, the GAO reminded the FHFA that the Obama administration’s loan modification program, which would be used to implement any principal reductions, expires at the end of December 2013.

A federal judge earlier this month had ruled that the Federal Housing Finance Agency’s case against UBS Americas will serve as the “test case” in a series of lawsuits that FHFA has filed concerning failed residential mortgage-backed securities. However, in another ruling a week later, Judge Denise Cote of the U.S. District Court for the Southern District of New York granted a motion by UBS to appeal her May 4 denial of the bank’s motion to dismiss on statute of limitation grounds. Judge Cote’s June 13 decision denied UBS’ request that it should not be the first of 17 cases to proceed because it was not a loan originator and it was not accused of fraud.

The Federal Housing Finance Agency would employ a new, more comprehensive examination rating system which would be used to inspect Fannie Mae, Freddie Mac and the Federal Home Loan Banks and the Banks’ Office of Finance under a proposed rule issued last week. The proposed new system, published in the June 19 Federal Register, seeks to implement a single risk-focused examination system for all three entities that would be similar to the “CAMELS” rating system used by federal prudential regulators for depository institutions.

Military homeowners holding Fannie Mae or Freddie Mac loans with Permanent Change of Station Orders will be eligible to sell their homes in short sale even if they are current on their mortgage under a new policy announced by the GSEs’ regulator late last week. The Federal Housing Finance Agency’s short-sale policy change is intended to make it easier for military homeowners with GSE loans to honor their financial commitments when they are required to move…

Fannie Mae and Freddie Mac would be excluded from purchasing loans subject to Property Assessed Clean Energy liens under a rule formally issued by the Federal Housing Finance Agency regulator two weeks ago. The FHFA’s notice of proposed rulemaking, was published in the June 15 Federal Register for public comment in compliance with a federal court order. The proposed rule directs Fannie and Freddie “not to purchase any mortgage where PACE financing with a priority lien was placed on the underlying property. Such financing moves ahead of the pre-existing first mortgage in lien priority, and thereby subordinates Fannie Mae and Freddie Mac security interests in the property.”

Fannie Mae’s and Freddie Mac’s home retention activity declined for the most part during the first quarter of 2012, according to a new analysis of Federal Housing Finance Agency data by Inside The GSEs. Total loss mitigation activity – total home retention efforts and foreclosure alternatives combined – declined 5.0 percent during the first quarter of the year to 214,812 and was down 14.3 percent from year-ago levels. Our analysis was based on the FHFA’s First Quarter 2012 Foreclosure Prevention Report. Total home retention efforts came to 111,739 at the end of the first quarter, a decrease of 7.4 percent from the fourth quarter 2011 and down 22.4 percent from the same period a year before.

The Federal Housing Finance Agency last week finalized a rule which establishes prudential standards relating to the management and operations of Fannie Mae, Freddie Mac and the Federal Home Loan Banks. The Housing and Economic Recovery Act of 2008 requires the FHFA director to establish standards that address 10 separate areas relating to the management and operation of the GSEs and FHLBanks and authorizes the director to establish the standards by regulation or by guideline.

The disparate impact theory of racial discrimination and the question of whether such claims can be brought under the Fair Housing Act have once again been brought to the doorstep of the Supreme Court of the United States. The case pits Mount Holly, NJ, against a citizens group that says the town’s redevelopment plan for their neighborhood would have a disparate impact on the mostly minority population of the area. The town prevailed in state court and in federal district court, but the Third Circuit appeals court ruled...