Secondary Market

Freddie Mac said Monday that it logged a $2.1 billion net loss for the second quarter. The company has requested $1.5 billion in taxpayer funding from Treasury, bringing the total amount of its capital draws while in conservatorship to $66.2 billion. Freddie's latest financials represent a slide from the previous quarter, when it posted a $676 million profit and needed no money from Treasury. The GSE acquired 24,799 REO properties through foreclosure in the second quarter but sold 29,355, shrinking its inventory of repossessed homes.

American International Group Inc. (AIG) filed a lawsuit Monday against Bank of America claiming the bank's subsidiaries, Countrywide and Merrill Lynch, withheld information from its investors regarding loan quality. AIG hopes to secure more than $10 billion from BofA to recover losses resulting from the alleged non-disclosures. The insurance company accuses BofA of giving investors a false account of the performance of its residential mortgage-backed securities. BofA maintains that AIG is responsible for its own losses and rejects AIG's accusations of fraud.

The U.S. Treasury Department's top officer is staying put, despite Republican lawmakers' public appeals for him to step down. After speculation that he might resign once the debate over the government's debt ceiling was resolved, Tim Geithner has decided to remain in his post as Treasury secretary, the administration says. Republican members of Congress began calling for Geithner's immediate resignation after S&P downgraded the United States' credit rating.

Congress' last-minute accord to avert a default wasn't enough to save the United States' top rating from Standard & Poor's. The agency downgraded the long-term credit rating of the U.S. to AA+, a grade just below the AAA rating the U.S. had held for 70 years. Analysts were expecting a temporary spike in Treasury yields, which are closely tied to mortgage rate trajectories, but investors responded with a rush on Treasuries, pushing yields down 13 basis points. Fannie Mae, Freddie Mac, and the Federal Home Loan Banks also had their S&P ratings lowered to AA+ on Monday.

Fannie Mae's second-quarter loss narrowed from the previous quarter, but still in the red, the GSE says it needs to draw another $5 billion from Treasury, bringing its tally of taxpayer-funded support to $104.8 billion since the company was placed into conservatorship. The company reported a net loss of $2.9 billion for the April-to-June period, compared to a net loss of $6.5 billion in the first quarter of the year. Fannie Mae acquired 53,697 REO homes through foreclosure over the three months ending in June.

Senator Jack Reed (D-Rhode Island) has sent a letter to the director of the Federal Housing Finance Agency (FHFA) recommending the agency require Fannie Mae and Freddie Mac rent out foreclosed properties rather than immediately attempting to sell them at bargain prices. Reed believes renting the properties would help the market on all fronts by reducing foreclosure inventories, providing affordable housing, and creating jobs in hard-hit industries.

Studies have shown that minorities have been disproportionately impacted by the nation's housing crisis. The National Association of Real Estate Brokers, Inc. (NAREB) is taking steps to ease that impact. NAREB is partnering with Wall Street investors to launch an $800 million Homeowner's Assurance Program (HAP) to bring foreclosure mitigation to minority families and clean up neighborhood blight in their communities.

The Five Star Institute has announced a partnership with Fannie Mae to educate real estate agents on Fannie Mae's Short Sale Assistance Desk (SSAD). Fannie Mae's SSAD helps expedite the process by allowing real estate agents to reach out to the GSE directly for short sale approval of first-lien, Fannie Mae-backed loans. Agents can access the appropriate forms through multiple listing services. With 107,953 short sales in 2010, such transactions continue in significant numbers this year - 35,406 as of April, according to a federal report.

The commercial mortgage-backed securities (CMBS) market had been abuzz with positive momentum and murmurings of recovery for the better part of this year, but Trepp says that has all but vanished within the past few weeks. The research firm reported Tuesday that its latest monthly CMBS delinquency reading surpassed the previous record. In July, the delinquency rate for U.S. commercial real estate loans in CMBS shot up 51 basis points to 9.88 percent, as spreads widened and a highly publicized new issue was pulled from the market.

The Federal Housing Finance Agency (FHFA) filed a lawsuit last week in a New York federal court against UBS Americas, Inc. for violations of federal securities laws related to UBS' sale of $4.5 billion in private-label residential mortgage-backed securities to Fannie Mae and Freddie Mac. The lawsuit alleges that UBS Americas made material misstatements and omissions about the mortgage loans underlying the bonds. Fannie and Freddie claim they have already lost in excess of 20 percent of their entire investment.