Fannie Mae and Freddie Mac this week reported a combined $4.74 billion in net income during the third quarter, as the two government-sponsored enterprises avoided taking further draws from the Treasury Department by staying in positive earnings territory. The GSEs’ combined third-quarter income was down 41.7 percent from the previous three-month period, mostly because Fannie’s net income fell 64.6 percent from second-quarter earnings that were pumped up by a $3.04 billion recorded benefit on credit losses. Fannie’s $1.81 billion in third-quarter net income was much more in line with the $2.72 billion it earned in the first three months of the year, as well as Freddie’s recent performance. Freddie reported...

The Consumer Financial Protection Bureau has found “significant non-compliance” during its examinations of mortgage lenders, compelling them to take a variety of steps deemed necessary to be brought into compliance, according to the CFPB’s first report on its examination findings. Violations under the Real Estate Settlement Procedures Act included failures to make proper and complete disclosures to consumers of costs and other terms because of errors in the good faith estimate and HUD-1 settlement statement, the CFPB stated. Truth in Lending Act violations included...

Basel III capital requirements proposed by federal regulators will have a significant negative impact on U.S. bank holdings of agency and non-agency MBS, according to industry participants. The capital requirements have yet to be finalized and are currently scheduled to begin being phased in Jan. 1 with full implementation in 2018. In June, the Federal Deposit Insurance Corp., the Federal Reserve and the Office of the Comptroller of the Currency proposed rules to implement Basel III capital standards – the most comprehensive overhaul of the U.S. bank capital framework since Basel I was implemented in 1989. Comments were due last week, and strong warnings were submitted by trade groups representing MBS market participants, banks and mortgage lenders. “If the Basel III [proposed rule] were implemented...

Fannie Mae and Freddie Mac could repay the U.S. Treasury faster than previously forecast, according to updated projections of potential draws for the two government-sponsored enterprises issued last week by the GSEs’ conservator. According to the Federal Housing Finance Agency, Fannie and Freddie are expected to draw between $191 billion and $209 billion from Treasury by the end of 2015. This year’s “reduced and more stable” projection by the FHFA is lower than the previous estimate made only a year ago, which offered a range of between $220 billion and $311 billion for total support through the end of 2014. “The key drivers of those results include...

Regulatory uncertainty continues to frustrate mortgage bankers who can see the outlines of major pending changes in consumer protection, securitization rules and capital requirements that remain largely enshrouded in bureaucratic fog. “We have these new concepts, qualified mortgages and qualified residential mortgages, but we don’t know what their exact definitions are,” said Michael Heid, president of Wells Fargo Home Mortgage, during a panel session at this week’s annual convention of the Mortgage Bankers Association in Chicago. “We are in a gray state; the concepts are there, but the rules aren’t. At the same time we’re having to clean up issues from the past.” Debra Still, president and CEO of Pulte Mortgage, said...

Mortgage real estate investment trusts that invest in MBS are likely to see their profitability reduced in coming quarters, largely as a result of the competition they’re facing from the Federal Reserve for assets to buy. Since the Fed’s Sept. 13 announcement that it would snap up an additional $40 billion of agency MBS a month as part of its latest quantitative easing, yields have dropped and spreads have narrowed, and that’s cutting into the earnings and dividends of mortgage REITs. Paul Miller, a securities analyst at FBR Capital Markets, agrees...

Advocates for GSE reform say recent actions by the Treasury and the Federal Housing Finance Agency have made it more important than ever for policymakers to start moving Fannie Mae and Freddie Mac away from government support or risk seeing the two enterprises enveloped forever within the federal budget. Two former Bush administration Treasury officials made their case this week in a Washington Post opinion piece, citing the government’s recent sale of stock in insurance giant American International Group to recoup the bailout billions Uncle Sam floated the company during the financial crisis as an admittedly inexact blueprint for Congress and the White House to follow to get the feds out of Fannie and Freddie.

Major banks reported increased charge offs and nonperforming assets for home-equity loans in the third quarter of 2012 due to new guidance from the Office of the Comptroller of the Currency. However, bank officials and industry analysts suggest that banks have largely already reserved for the new reported losses and that overall trends point toward improvements in HEL performance. In June, the OCC updated its accounting guidance to require banks to classify mortgages and other loans discharged by troubled borrowers in bankruptcy as troubled debt restructurings. The agency said a bank should charge off the excess of the loan’s carrying amount over the fair value of the collateral with the remaining balance of the loan placed into non-accrual status. “The bankruptcy court ‘removed’...

The mortgage lending industry is universally opposed to a Consumer Financial Protection Bureau proposal to establish a new, more comprehensive “all in” annual percentage rate formula that would include various additional fees and charges. The APR provision is one part of the CFPB’s extensive proposed rule intended to simplify and integrate the mortgage disclosures consumers are entitled to under the Truth in Lending Act and Real Estate Settlement Procedures Act. The overhaul was mandated by the Dodd-Frank Act. In the proposed rule, which came out in July, the bureau would replace...

The number of major fair lending settlements brought by federal regulators over the last year highlights the increasing importance of mortgage lenders properly evaluating their risk of being out of compliance and responding appropriately and preemptively, according to top banking agency officials. Since November 2011, the Department of Justice has settled seven fair lending cases – against Bank of America, Countrywide Financial, GFI Mortgage Bankers, Luther Burbank Savings, Mortgage Guaranty Insurance Corp., SunTrust Mortgage, and Wells Fargo – mostly related to steering, pricing and underwriting. In the aggregate, these settlements have produced more than $550 million in monetary relief in compensation for more than 250,000 victims, according to Jon Seward, head of housing and civil enforcement for the Justice Department. “All seven cases resulted from referrals” as the regulators are...