President Obama this week moved to break a GOP blockade in the Senate by making a recess appointment of Richard Cordray to become director of the Consumer Financial Protection Bureau, a political maneuver that defies 20 years of precedent and may set the stage for a legal challenge. The Obama administration claimed that it is fully within its Constitutional authority to place the new director into his position, dismissing as a gimmick the pro-forma sessions Republicans used to block the nomination. A number of consumer groups came out in support of the appointment. The president’s allies in Congress were...

There’s a very good chance the final disposition of securities fraud charges leveled by the Securities and Exchange Commission against six former Fannie Mae and Freddie Mac top executives could be determined at trial rather than by a pre-trial settlement, thanks in part to a recent adverse SEC court decision, according to one legal expert. On Dec. 16, the SEC filed suit in the U.S. District Court for the Southern District of New York, alleging that former Fannie and Freddie executives made material misstatements to the public, investors and the media about the two government-sponsored...

Bank of America reached a landmark $335 million agreement with the Department of Justice to settle allegations that Countrywide systematically discriminated against African-American and Hispanic borrowers during the housing boom, manipulating them into taking subprime loans when they were qualified for prime financing. It’s the largest settlement ever for a residential fair lending claim. The case also marks the first time the Justice Department has alleged and obtained relief for borrowers who were steered into mortgages on the basis of their race or national origin, a practice that placed...

Risk-sharing programs that have already been tested and proven effective could be dusted off and made the focal point of efforts to steer the mortgage finance system to a more sustainable, less volatile foundation, investors say. There is widespread agreement that private capital needs to play a much greater role in the mortgage finance system that has been dominated by Fannie Mae, Freddie Mac and the government mortgage-insurance programs since the financial crisis of 2008. There is no consensus on how to do that, and little likelihood that Congress will agree to a solution any time...

The one category of distressed loan that the federal government has the most control over – mortgages insured by the FHA and VA – continues to show the worst success rates for loan modifications. After 12 months of post-modification seasoning, over half (51 percent) of government-insured loans were 60 days or more past due, according to a report issued this week by the Office of the Comptroller of the Currency. That compared to an overall 60+ re-default rate of 39 percent. Fannie Mae and Freddie Mac mortgages, along with loans held in the servicer’s portfolio, showed the best...

The timing and method of disposing of real estate owned properties will have significant implications for home prices, according to Fitch Ratings analysts. The supply of REO homes is unprecedented, with the large overhang of distressed properties in the housing market and weak demand, analysts said. The REO industry estimates that more than 2 million properties nationwide are in foreclosure and that 25 percent to 35 percent of all home sales are related to properties whose mortgages have defaulted. In a recent home-price projection report, which uses the rating agency’s Sustainable Home...

The outcome of the securities fraud case leveled against six former top executives of Fannie Mae and Freddie Mac could hinge on what exactly is considered a subprime loan. At least one defendant is prepared to argue that there is no standard definition.In fact, the GSEs appear to still be reporting their subprime and Alt A exposure in much the same way they did in the period covered by the Securities and Exchange Commission lawsuits.Late last week, the SEC pulled the trigger on its three-year investigation of claims that the two GSEs failed to disclose to investors the companies’ exposure to subprime mortgages prior to the 2008 housing market crash.

Industry trade groups, as well as Fannie Mae and Freddie Mac’s regulator, are questioning the wisdom of Congress as lawmakers in both chambers have bills pending to hike the fees charged to guarantee GSE mortgages as a way to help offset the cost of extending the payroll tax cut through 2012.Both House and Senate versions of tax cut extension bills would add an additional 10 basis points to the guarantee fees charged by Fannie and Freddie through 2021. The increase would offset about $35.7 billion in costs, including $1.3 billion in the first year, according to the Congressional Budget Office.As Inside the GSEs went to press, the prospect of any tax cut extension was in doubt after the House rejected the bill calling for a two-month extension. Instead, House Republicans demanded immediate talks with the Senate on a year-long plan but the Senate ruled out further negotiations until the House passes the stop-gap measure.

California Attorney General Kamala Harris filed suit this week against Fannie Mae and Freddie Mac, taking up a notch her probe of the two GSEs’ mortgage lending and foreclosure practices.The lawsuits, filed in California Superior Court in San Francisco, seek to compel the companies to turn over documents the AG’s office had sought through a subpoena served to the two companies on Nov. 15.The Federal Housing Finance Agency directed Fannie and Freddie not to respond to the subpoenas.The subpoenas sought information about how Fannie and Freddie are handling thousands of foreclosed properties, as well as details about the GSEs’ mortgage-servicing and home-repossession practices.

The Federal Housing Finance Agency is cutting lenders a break for the holiday season in the form of a deadline extension for implementing changes to how lenders submit mortgages to Fannie Mae and Freddie Mac.The FHFA announced last week that Fannie and Freddie would delay implementation dates for the Uniform Loan Delivery Dataset, a key component of the GSEs’ Uniform Mortgage Data Program.“Industry participants have demonstrated continued support for the UMDP and the updated timeline will allow for a successful transition to a new loan delivery format,” said the Finance Agency. Announced by the GSEs in May 2010, the UMDP initiative was established to help improve loan data accuracy, simplify the exchange of data and increase confidence to lending institutions that the loan data provided are complete and accurate.