Fannie Mae and Freddie Mac this week reported a combined $63.3 billion in net income during the first quarter of 2013, which represents a huge dividend to taxpayers on the total $189.4 billion capital infusion they received since going into conservatorship. Together, the two government-sponsored enterprises will have paid $131.6 billion to the Treasury by the end of the second quarter, when the government “sweep” of excess net worth takes place. Under the terms of their bailout, the GSEs never pay down their Treasury draws, regardless of how much they pay in preferred stock dividends or net-worth sweeps. But Fannie and Freddie are...

There were no real surprises this week from the Federal Open Market Committee, which announced it plans to continue purchasing additional agency MBS at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month. But observers continue to contemplate the Fed’s eventual exit strategy and how it will affect the markets. “The committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency MBS in agency MBS and of rolling over maturing Treasury securities at auction,” the FOMC said in what is becoming standard, boilerplate language. “Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.” Also, the committee plans...

Federal regulators said they will collectively work with Congress to reduce the agency market share of MBS issuance. The members of the Financial Stability Oversight Council said completion of the qualified-residential mortgage rule will also help increase non-agency activity. “The council recommends that the Treasury Department, the Department of Housing and Urban Development, and the Federal Housing Finance Agency continue to work with Congress and other stakeholders to develop and implement a broad plan to reform the housing finance system,” the FSOC said in its 2013 annual report, released late last week. Tobias Adrian, a vice president at the Federal Reserve Bank of New York and contributor to the report, said...

Repurchase agreements remain an important source of funding for agency MBS, collateralized mortgage obligations and other asset classes despite continued concerns about liquidity and regulatory risks, according to a Fitch Ratings analysis. As of March 2013, an estimated $1.83 million in assets were financed by the U.S. tri-party repurchase market, according to Fitch analysts Martin Hansen, Robert Grossman and Kevin D’Albert. The analysts noted...

The Department of Housing and Urban Development has announced plans to consolidate multifamily hubs nationwide and close a number of its smaller field offices. The plan would result in an estimated $61.9 million in annual costs savings for HUD after completion and affect approximately 900 of the department’s 9,300 employees. No employee will be laid off as a result of the restructuring, according to HUD Secretary Shaun Donovan. Donovan said the changes are part of a broader, long-term effort that will allow HUD to continue to deliver high-quality services by adapting modern best practices. The decision to ...

The Treasury Department strongly defended the Home Affordable Modification Program this week after criticism and calls for changes from the Special Inspector General for the Troubled Asset Relief Program. The Obama administration is also considering extending HAMP, which is currently set to expire at the end of this year. “Data show that the majority of homeowners who receive assistance from HAMP have a high likelihood of long-term success to avoid foreclosure, and that HAMP modifications continue to outperform private industry modifications,” said Andrea Risotto, Treasury’s spokesperson for HAMP. She was responding...

Standard & Poor’s this week deployed legal countermeasures against the federal government by asking a judge to dismiss a civil fraud lawsuit brought against the rating agency, slamming the litigation as an “overreach.” In February, the Justice Department filed a $5.0 billion lawsuit against S&P accusing it of knowingly inflating its ratings on residential MBS and collateralized debt obligations to boost its revenue and market share in the years leading up to the 2008 financial crisis. The filing in California federal court by S&P’s parent company, McGraw-Hill Co., says...

The Financial Stability Oversight Council issued a warning this week regarding the prolonged period of low interest rates, singling out real estate investment trusts that invest in agency mortgage-backed securities. “Agency REITs, a sector that how grown considerably in recent years, are highly exposed to a rise in interest rates,” said Trent Reasons, a senior policy advisor at the Treasury Department. An analysis of 16 REITs by Inside MBS & ABS, an affiliated publication, determined...

The Obama administration’s 2014 budget proposal calls for a Home Affordable Refinance Program for non-agency borrowers, although prospects for getting legislation through Congress remain slim. The proposed budget included a small section entitled “finish the task on universal refinancing for responsible homeowners.” The section noted that the Obama administration worked with the government-sponsored enterprises in 2012 to double the number of HARP refinances for GSE borrowers with negative equity ...

Department of Housing and Urban Development Secretary Shaun Donovan this week reiterated his agency’s request for additional legislative authority to regulate the Home Equity Conversion Mortgage program by mortgagee letter so that much-needed changes can be implemented immediately. Rather than go through the tedious legislative process of amending HECM legislation to improve the program and reduce HECM losses, expanding HUD’s authority would enable the department to undertake immediate reforms, such as restricting lump sum payments, requiring financial assessments of HECM applicants and requiring borrowers to ...