Secondary Market

The program launched by Treasury in March 2009 to take toxic mortgage assets off banks' books has earned $1.7 billion for taxpayers -- $500 million in dividends on the investments made and $1.2 billion in ""unrealized gains"" as the value of securities purchased under the program has increased. The private investment firms participating in the program - including the likes of AllianceBernstein, BlackRock, and Invesco - are seeing returns ranging from 27 to 75 percent.

A federal judge in California has dismissed all claims brought against Bank of America by investors who bought mortgage-backed securities (MBS) from Countrywide before BofA purchased the subprime lender in 2008. Even after the investors narrowed the scope of their case, the judge granted Bank of America's motion to dismiss on the grounds that the plaintiffs failed to show that two separate transactions between the bank and Countrywide involving the transfer of assets constituted a de facto merger.

Standard & Poor's has lowered its outlook from stable to negative on the debt issues of Fannie Mae and Freddie Mac, as well as the Federal Home Loan Bank System and the Farm Credit System Banks. The move follows the ratings agency's outlook revision on the United States earlier this week, also slipping from stable to negative. S&P says the outlook downgrades on the other four entities are because of their ties to the U.S. government. Should S&P's rating of the U.S. be lowered, Fannie's and Freddie's ratings would likely follow suit.

The New Democratic Coalition has added the nation's housing finance system to its list of things to ""modernize."" They've outlined principles for following through with the wind-down of Fannie and Freddie while maintaining a limited government role to ensure access to the 30-year fixed-rate mortgage. But the debate is intense over whether the 30-year mortgage should stick around. With or without it, one research group says the numbers prove government guarantees aren't necessary to entice private investors.

Data released by the Federal Housing Finance Agency (FHFA) Thursday shows further declines in residential property values. Home prices in the United States declined 1.6 percent on a seasonally adjusted basis from January to February, according to FHFA's latest monthly house price index. FHFA's index is calculated using purchase prices of houses backing conventional mortgages that have been sold to or guaranteed by Fannie Mae and Freddie Mac, and FHFA says it is now at the same level seen in February 2004.

Wells Fargo reported record earnings of $3.8 billion for the first quarter of 2010. That's up 48 percent from the same period last year, and up 10 percent from the fourth quarter of 2010. The lender's first-quarter profit beat analysts' estimates, but the market didn't look too kindly on the underlying numbers that showed revenue was down $1.2 billion from the previous quarter. That decline included a $741 million drop in mortgage banking fee income. While revenue slipped, Wells Fargo says its numbers were boosted by improving loan quality.

Prices on commercial real estate have slipped for three consecutive months and are now dangerously close to double-dip territory due to the large share of distressed transactions recently, according to Moody's Investors Service. The agency reported Wednesday that its index of commercial property prices fell another 3.3 percent in February. The index is down 4.9 percent from 12 months earlier and only 0.8 percent above its post-peak low set in August 2010. Approximately 29 percent of the transactions tracked in February were distressed.

Citigroup Inc. said Monday that it pulled in net income of $3.0 billion for the first quarter of 2011. The bank's profit declined $1.4 billion from the first quarter of 2010, but more than doubled compared to the final three months of last year. Even with the year-over-year drop, the lender's Q1 earnings beat analysts' expectations. Citi reported that the company's net credit losses declined 25 percent from a year earlier to $6.3 billion, as credit quality continued to improve for the seventh consecutive quarter.

The headline business news Monday was Standard & Poor's notice that its outlook for the United States has turned negative. The agency maintained its AAA rating but warned that there is a one-in-three likelihood the long-term rating could be lowered over the next two years. The main culprit is the nation's growing debt and discord in Washington over the budget, but the agency also cited outlays to mortgage giants Fannie Mae and Freddie Mac as a substantial risk, warning that taxpayer support for the two firms could go as high as $685 billion.

CoreLogic Credco, a provider of merged credit reports, recently integrated its FinalCheck suite into the Ellie Mae Encompass360 mortgage management solution. FinalCheck is an automated Fannie Mae loan quality initiative (LQI) compliance suite that assists lenders in verifying credit, application, and fraud data. The company says the technology can help lenders uncover undisclosed debt prior to loan submission and mitigate repurchase risk to avoid loan buy-backs from the GSE.