Government

Organizations from every corner of the industry are weighing in on the administration's proposal to reform the nation's housing finance system. A number of groups are throwing their support behind the long-term reform option that calls for a group of private companies to provide guarantees for well underwritten mortgage securities, and the federal government to offer investors a type of reinsurance on these bonds. There are some, though, who say even this more prudent approach will raise borrowing costs and push small businesses out of the market.

In the House Financial Services Committee's oversight plan released this week, the committee said it will examine the implementation of new rules issued by the Federal Reserve governing mortgage originator compensation, which are scheduled to become effective April 1, 2011. The committee says it is concerned that the rules may have an adverse impact on the ability of small businesses that originate mortgages.

On top of the more imminent reform measures laid out Friday to begin winding down Fannie Mae and Freddie Mac, the Obama administration's proposal outlines three options for long-term reform and structuring the government's future role in housing. One approach would pull the government completely out of the mortgage guarantee business except for insurance provided through FHA. A second option would add a backstop mechanism during times of crisis to the mix. And a third option would provide an FDIC-type insurance guarantee for certain mortgage securities.

A study by George Washington University suggests the Federal Housing Administration (FHA) is carrying too much risk in insuring such a large percentage of large loans. In 2007 the FHA share of the home purchase market was at 6 percent. In 2009 that number came in at more than 56 percent. During that time, the size of the agency's loan limits more than doubled. The administration's plan for reforming the housing finance market indicates the government is planning to return FHA to its traditional role.

The Obama administration says its plan for reforming the housing finance system will dramatically reduce the government's role in the mortgage market and bring an end to Fannie Mae and Freddie Mac within seven years. Key actions for phasing out the GSEs include pricing their guarantees based on the same capital standards as private lenders and increasing down payment requirements to 10 percent. The proposal also outlines near-term reforms to correct problems in foreclosure processing such as setting national standards for mortgage servicing.

The industry is abuzz with news that the federal government could unveil its proposal for overhauling Fannie Mae and Freddie Mac as early as Friday. The GSEs haven't had a profitable quarter in over three and a half years and were placed under government control in 2008 to avert their collapse. Since then, Treasury has pumped more than $150 billion into the two GSEs and cries for their reform have grown louder. The forthcoming proposal is expected to lay out three recommendations that call for phasing out the nation's two largest housing-finance companies.

Bruce M. Witherell resigned from his position and responsibilities as chief operating officer of Freddie Mac on Wednesday, according to a regulatory filing with the Securities and Exchange Commission (SEC). The GSE says Witherell is stepping down ""for personal reasons."" His resignation is effective immediately. According to the SEC filing, Witherell will not receive any termination benefits. A former Morgan Stanley and Lehman Brothers executive, Witherell joined Freddie Mac as COO just 17 months ago.

Fannie Mae announced Monday that it provided $16.9 billion in debt financing for the rental housing market in 2010, through around 2,300 multifamily mortgage loans for 306,000 rental units across the nation. About 91 percent of the multifamily units financed by the company last year were affordable to families who were at or below the median income of their communities.

A California appeals court ruling could have far reaching effects for the mortgage servicing community. The three judges hearing the case of Aceves v. U.S. Bank found that the bank had promised to negotiate a loan modification for a customer while intending to proceed with the foreclosure on the customer's house. The bank claimed an oral promise to postpone foreclosure is unenforceable. But the court ruled against the bank because the homeowner had opted against other actions to keep her home based on the bank's word it would offer a modification.

DecisionReady, a provider of default servicing compliance solutions based in California, announced this week that it has reviewed 1 million delinquent residential mortgage loans for loss mitigation and foreclosure process and policy compliance for leading servicers. DecisionReady technology offers compliance for early stage delinquency through loss mitigation, foreclosure, and the post-sale process to ensure regulatory rules and investor guidelines are met.