The Federal Housing Finance Agency this week said it is still deliberating writedowns on Fannie Mae and Freddie Mac mortgages as industry insiders aren’t sure what to make of the agency’s recent thumbs up to GSE participation in two state principal reduction programs. Last month, the GSEs – with the FHFA’s blessing – opted to participate in principal reduction programs in California and Nevada. Both programs will use part of the $7.6 billion Hardest Hit Fund to pay down the loans Fannie and Freddie own or guarantee. The FHFA noted that critical directives issued by the GSEs last year cleared the way for participation in such programs as long as the servicers or the GSEs would not have to match those funds.

Fannie Mae demonstrated measurable progress during 2011 while conditions at Freddie Mac neither worsened nor improved significantly but both GSEs have ample room for improvement, according to a report issued this week by the Federal Housing Finance Agency. The FHFA’s fourth annual Report to Congress deemed the two GSEs “critical supervisory concerns” last year with “continuing credit losses” coming primarily from loans originated during the years 2005 to 2007. The report identified “key challenges facing each company, including the ongoing stress in the nation’s housing markets, the challenging economic environment and the uncertain future facing the enterprises,” noted the FHFA. “However, management and the boards were responsive throughout 2011 to FHFA’s findings and challenges and took appropriate steps to begin resolving identified issues.”

The Federal Housing Finance Agency has announced a new senior officer tasked to be the Finance Agency’s point person regarding its strategic plan for Fannie Mae and Freddie Mac. FHFA Acting Director Edward DeMarco two weeks ago appointed Wanda DeLeo as deputy director leading the agency’s newly created Office of Strategic Innovations. The new division will oversee and coordinate the FHFA’s strategic plan for GSE conservatorships. Unveiled in February, the FHFA’s plan outlines the next phase of Fannie and Freddie conservatorships.

Is the end near for thrifts? Analysts at Keefe, Bruyette & Woods seem to think so. This week’s announcement by federal banking regulators of three proposed rules that would revise capital requirements may be the death blow to thrifts as we know them, said KBW equity analysts Frederick Cannon, Brian Kleinhanzl and Matthew Dinneen. The analysts contended that regulatory changes following the financial crisis and the announcement of new capital requirements have ended the viability of the thrift industry. Issued jointly by the Federal Reserve Board, the Federal Deposit Insurance Corp. and the Office of the...

The three federal banking agencies over the past week released proposed rules to implement the Basel III regulatory capital reforms and changes required by the Dodd-Frank Act that many observers predict will influence bank participation in the mortgage market. The proposed changes would increase bank capital requirements and re-calibrate risk-based capital charges. One of the key changes stemming from the Basel III accord reached by international bank regulators would limit the amount of mortgage servicing rights, along with investments in certain non-consolidated entities and deferred taxes, to no more...

Mortgage industry officials are anxious about the Consumer Financial Protection Bureau’s upcoming rulemaking on mortgage servicing and have provided some empirical data and a number of principles they think the bureau ought to follow. The American Bankers Association recently provided the CFPB with excerpts from its annual real estate survey to influence the CFPB’s determination as to whether it should exempt, in whole or in part, certain categories of servicers or servicing arrangements from the bureau’s upcoming servicing requirements. Of the 186 banks that participated, roughly 86 percent had assets of...

The Department of Housing and Urban Development is working on a mortgagee letter to guide FHA-approved lenders on their use of credit overlays to protect themselves from potential liability in single-family mortgage transactions. In remarks at a Women in Housing and Finance meeting this week in Washington, DC, Acting FHA Commissioner Carol Galante said the department is concerned about FHA lenders boosting credit score requirements much higher than what the FHA would allow. Galante said lenders are requiring credit scores of 700 and higher, well above the traditional FHA score requirement of 640...

Members of Congress are leaning on the Department of Housing and Urban Development to loosen FHA underwriting standards for condominiums, echoing trade group concerns, although most financing for these properties is provided by Fannie Mae and Freddie Mac. The letter from 69 congressmen, which included members from both sides of the aisle, asked HUD to relax guidelines on owner-occupancy limitations which require that at least 50 percent of a building’s units be occupied for borrowers to be eligible for FHA financing. They also want the FHA to ease up on delinquent assessment standards and certification...

While modifications through the Obama administration’s Making Home Affordable programs have slowed in pace, the now-implemented “Tier 2” expansion may soon increase activity. New activity in the program was down in every category during the first quarter of 2012, according to an Inside Mortgage Finance analysis of Treasury Department data. The number of new trial modifications fell 9.0 percent from the fourth quarter, while new permanent mods were down 21.2 percent. Because a major servicer in January revised the number of trial mods it had offered since the program began, it’s...(Includes one data chart)

A continued outpouring of concerned industry commentary about the Consumer Financial Protection Bureau’s pending ability-to-repay rule has prompted the bureau to hit the reset button on the public comment period, giving the mortgage lending industry another opportunity to address some limited, specific issues before the rule becomes final. During a hearing in the Senate Banking, Housing and Urban Affairs Committee, Sen. Mike Crapo, R-ID, pressed his concerns about the rule with CFPB Director Richard Cordray and questioned him about the bureau’s intentions. “The housing credit market...