Congress should consider changing the mandate of the Federal Housing Finance Agency’s conservatorship of Fannie Mae and Freddie Mac to address a “conflict of interest” that inhibits the Finance Agency’s supervision of the GSEs, a housing economist told senators this week.Testifying before the Senate Committee on Banking, Housing and Urban Affairs, Columbia School of Business Professor Christopher Mayer said a significant problem with the ongoing operation of the GSEs has been the failure to adequately address operational conflicts.“The evidence suggests that the conflict of interest between the businesses of providing mortgage guarantees and managing a large retained portfolio of mortgages and [mortgage-backed securities] has led to obstacles to normal credit conditions,” said Mayer.

The Federal Housing Finance Agency has made a number of minor but important changes to its existing Freedom of Information Act regulations.On Jan. 31, the Finance Agency published in the Federal Register updates to its FOIA regulations to include the FHFA Office of Inspector General. The FHFA-OIG, which came into existence in October 2010, did not exist when FHFA’s original FOIA regulations were issued in 2009.The FHFA final regulation lists the various revisions to the agency’s 2009 FOIA regulation, as well as describes what information is exempt from disclosure.

Industry insiders are cautiously expressing optimism about widespread reports that the Federal Housing Finance Agency is having second thoughts about implementing its proposed overhaul of mortgage servicing compensation in the face of massive lender pushback.Numerous published reports have fueled the industry’s expectation that the FHFA is working to tactfully back away from proposed alternatives for a government-sponsored enterprise compensation model intended to benefit servicers, consumers and investors.The Finance Agency’s September discussion paper set out two alternatives for changing the current 25 basis-point minimum fee compensation method for mortgage loan servicers. One alternative would reduce the minimum-servicing fee to as low as 12.5 bps payment with a 5 bps reserve fund, and the second alternative would institute a fee-for-service method whereby the loan servicer would be compensated with a flat fee per month for each performing loan they service.

A Federal judge in Chicago tabled for the moment the Federal Housing Finance Agency’s hopes of a speedy ruling in its favor of its lawsuit to exempt Fannie Mae and Freddie Mac from the city’s new vacant building ordinance, although the judge appears open to hearing the FHFA’s jurisdictional argument.Last month, U.S. District Court Judge Joan Lefkow denied the FHFA’s request for summary judgment in its lawsuit against Chicago while she ordered the city to file its response to the Finance Agency’s litigation.Filed in December, the FHFA’s lawsuit on behalf of the two GSEs seeks to prevent the city from enforcing the ordinance which requires mortgagees to pay a $500 registration fee for vacant properties and requires monthly inspections of mortgage properties to determine if they are vacant.

The five large mortgage servicers that agreed to a $25 billion settlement with 49 state attorneys general this week have already established more than enough reserves to cover their costs, analysts say. Bank of America, Wells Fargo, JPMorgan Chase, Citigroup and Ally Financial agreed to pay $20.0 billion in financial relief to homeowners and $5.0 billion to federal and state governments, of which $1.5 billion will be used to compensate some borrowers who have gone through foreclosure. Both the Federal Reserve Board and the Office of the Comptroller of the Currency levied separate monetary penalties...

One potential coup for the mortgage industry in the landmark multistate robosigning settlement announced this week is the detailed look at national servicing standards at a time when the states are racing to implement their separate foreclosure and servicing reforms. The terms for the $25 billion deal reached by 49 states, federal officials and the five major banks – Bank of America, Wells Fargo, JPMorgan Chase, Citigroup and Ally Financial – have yet to be released. However, one document that immediately made its way onto the settlement’s new website was an overview of the new servicing...

The mortgage settlement agreement between state and federal law enforcement agencies and the country’s five largest loan servicers will unleash a new foreclosure wave that will cause real estate-owned properties and distressed home sales to increase, according to market observers. Having the Federal Housing Finance Agency’s REO Initiative ready will be useful when the foreclosure and REO tsunami comes rolling in, academics, economists and analysts agree. The number of properties classified by banks as “real estate-owned,” or REO, has declined over the past year. The reason: the robosigning scandals...

Most observers don’t think the Obama administration’s proposal to use the FHA program to refinance underwater non-agency mortgage borrowers stands much of a chance on Capitol Hill, but the Department of Housing and Urban Development is moving ahead with a change it can make on its own that’s designed to spur FHA refinance activity. Acting FHA Commissioner Carol Galante announced that the agency is changing its Neighborhood Watch system to exclude streamlined FHA refinance loans from lender performance scoring. A key feature of the online system is a comparison of each lender’s early default rate to the...

State attorneys general and federal officials this week announced a massive legal settlement with five major mortgage servicers, finally concluding a torturous 16-month-long negotiation. Some 49 states – including New York, California and Florida – agreed to the $25 billion settlement with JPMorgan Chase, Bank of America, Wells Fargo, Ally Bank and Citigroup. The agreement does not provide blanket immunity for the lenders, which can still face criminal charges and are subject to claims over securitization practices and claims brought by individual borrowers. The agreement is based on investigations by...

Industry representatives and members of Congress looked to the role of the appropriations process as House Republicans strengthened their push for greater oversight of and transparency from the Consumer Financial Protection Bureau. The House Financial Services Subcommittee on Financial Institutions and Consumer Credit held a hearing this week to consider separate bills that would change how the CFPB is funded. H.R. 1355, the Bureau of Consumer Financial Protection Accountability and Transparency Act of 2011, introduced by Rep. Randy Neugebauer, R-TX, would remove the CFPB from the Federal Reserve System, where...