Secondary Market

In the first quarter of this year, the mortgage giant reported pre-tax income of $8.1 billion, the largest in its history. Fannie Mae attributed the improvement to ""strong credit results driven by an increase in home prices, including higher average sales prices on Fannie Mae-owned properties, a decline in the number of delinquent loans, and the company's resolution agreement with Bank of America."" The GSE also announced it will pay $59.4 billion to Treasury.

Freddie Mac's first-quarter earnings came in slightly ahead of last year's final quarter, the company revealed in its quarterly filing. First-quarter net income at Freddie Mac was $4.6 billion, barely above the $4.5 billion recorded in Q4 2012 but well above the $577 million in last year's first quarter--and the second largest in company history.

A majority of real estate experts responding to a recent Zillow survey expressed some concern that the Federal Reserve's current policies could lead to another housing bubble. Only 4 percent of respondents are not at all worried about a bubble resulting from the Fed's monetary policy that is keeping mortgage rates down. However, 48 percent see the Fed's policies as ""a little risky,"" and the remaining 48 percent categorized the risk as ""moderate to high risk."" Experts also expect prices to end this year 5.4 percent higher than their level at the start of the year.

Refinances through the government's Home Affordable Refinance Program (HARP) remained strong as mortgage rates stayed near record-low levels, according to the Federal Housing Finance Agency's (FHFA) most recent refinance report. In February, 97,738 Fannie Mae and Freddie Mac loans were refinanced under the program, bringing the total to 2.3 million since HARP's April 2009 inception. Underwater borrowers also continued to represent a large share total HARP refinance volume. Year-to-date through February, borrowers with LTVs beyond 105 percent accounted for nearly half of all HARP refinances.

Flagstar Bancorp, Inc., and MBIA Inc. announced a settlement between the two companies related to transactions on securities that flopped during the housing crisis. Under the terms of the agreement, Flagstar will pay MBIA $110.0 million, an amount ""consistent with [MBIA's] recovery expectations,"" CEO Jay Brown said. Flagstar does not expect any significant financial impact as a result. According to a statement from the company, MBIA will use the cash received to pay a portion of its secured loan from National Public Finance Guarantee Corp.

The percentage of banks reporting stronger demand for mortgage loans rose in the second quarter, the Federal Reserve reported Monday, with more banks easing lending standards. Those results, revealed in the Fed's Senior Loan Officers Opinion Survey, are consistent with reports that mortgage loans are becoming easier to obtain. While the results suggest a trend in lending standards, they could be misleading: A bank which has tightened standards as much as possible may not necessarily ease them.

The Federal Housing Finance Agency (FHFA) has directed Fannie Mae and Freddie Mac to limit future loan purchases to those that meet the Consumer Financial Protection Bureau's (CFPB) criteria for ""qualified mortgage"" loans. In a release, FHFA said that beginning January 10, 2014, the GSEs will no longer purchase loans subject to CFPB's ""ability to repay"" rule if those loans are not fully amortizing, have terms of longer than 30 years, or include points and fees in excess of 3 percent.

Without a government guarantee, Fannie Mae's and Freddie Mac's multifamily businesses would be less viable and ""have little inherent value,"" according to the Federal Housing Finance Agency (FHFA), the entities' conservator. As the FHFA works toward its goal of winding down the GSEs' presence in the market, the conservator required each GSE to determine whether its multifamily business could operate without a government guarantee. Both GSEs suggest without a government guarantee, their multifamily units would not be able to support affordable housing programs.

The economy added 165,000 jobs in April--rebounding from a weak report for March--and the unemployment rate dropped to 7.5.percent, its lowest level since December 2008, the Bureau of Labor Statistics reported Friday. Economists had forecast payrolls would grow by 153,000, and that the unemployment rate would remain at 7.6 percent. Payroll growth for March, originally reported at 88,000, was revised upward to 138,000, and February was revised to 332,000 from 268,000.

In a notice Thursday, Freddie Mac encouraged servicers to prepare for new requirements for default-related legal services that will take effect in less than a month. Under the new requirement, Fannie Mae and Freddie Mac servicers must select qualified law firms by June 1 to handle all new referrals of default-related legal services, such as foreclosures, loss mitigation, bankruptcy, and related litigation.