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GSEs’ Boom Loans Make for ‘Critical Supervisory Concerns’

Posted By Carrie Bay On June 13, 2011 @ 6:09 pm In Government,Loss Mitigation,Market Studies,Secondary Market | No Comments

The ""Federal Housing Finance Agency"":http://www.fhfa.gov (FHFA) issued its ""third report to Congress"":http://www.fhfa.gov/webfiles/21570/FHFA2010RepToCongress61311.pdf Monday, detailing the regulator's 2010 annual audit of Fannie Mae and Freddie Mac.

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The GSEs' losses last year totaled $28 billion, but FHFA stressed that was an improvement over their 2009 losses of $93.6 billion.

The amount of taxpayer support needed by the two mortgage giants also narrowed. Between them, monetary draws under their preferred stock agreements with Treasury totaled $28 billion in 2010, compared to $66.1 billion in 2009.

Edward DeMarco, acting director of FHFA, says both Fannie and Freddie remain ""critical supervisory concerns,"" primarily because of continuing credit losses from loans originated during 2005 through 2007, as well as forecasted losses from those loans that have yet to be realized.

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""Although past business decisions leading to these losses cannot be undone, each enterprise…has improved underwriting standards for loan purchases in the past two years,"" DeMarco noted.

According to FHFA's report, the GSEs' claimed more than 60 percent of new single-family mortgage production in 2010.

Because of taxpayer support and the government backing afforded through the conservatorship, DeMarco says Fannie and Freddie ""accomplished their statutory mission of facilitating stability and liquidity for...housing finance.""

The federal agency also reported that the GSEs completed 950,000 loan modifications and other foreclosure alternative actions in 2010.

FHFA’s annual examinations extended to the 12 Federal Home Loan Banks that it regulates.

All 12 banks, which provide funding to thousands of community-based financial institutions across the country for home mortgage loans and other economic development lending, recorded positive annual earnings for the 2010 fiscal year.

Advances by the federal banks, meaning loans made to member institutions, totaled $479 billion in 2010, down from $631 billion at year-end 2009.

FHFA says the financial condition and performance of the Federal Home Loan Banks “stabilized” last year, but the agency noted that several individual banks continued to be “negatively affected” by their exposure to private-label mortgage-backed securities.


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