Secondary Market

In November, Texas representative Randy Neugebauer sent a letter to the Federal Housing Finance Agency (FHFA) requesting a report from Acting Director Edward DeMarco detailing how much taxpayer dollars are being spent on legal costs for former Fannie and Freddie execs. A report released last week details just that, and the results are eye opening. Currently the bill sits at a hefty $160 million and counting.

Fitch Ratings says approximately 2,000 commercial mortgage loans are due to mature over the next 12 months, representing an outstanding balance of $22.5 billion. According to a new report released Friday by the ratings agency, the maturing loans were originated between 1996 and 2007 and are predominantly secured by retail, office, and multifamily properties. Fitch says 30 percent are not expected to pass its refinancing test.

Fannie Mae has issued a notice to its servicers, instructing them to postpone foreclosure proceedings for unemployed homeowners who are receiving help through Hardest-Hit Fund programs run by state housing finance agencies. According to the GSE's newly released directive, if a housing finance agency (HFA) notifies a servicer that a borrower has been approved for assistance, the servicer must not refer the mortgage loan to foreclosure or conduct a scheduled foreclosure sale for 45 days.

The volume of distressed residential properties in the United States is the primary factor hindering a full recovery in the country's housing market, according to Standard & Poor's (S&P). Based on data through the end of the third quarter of 2010, S&P puts the principal balance of the nation's shadow inventory of distressed homes at more than $450 billion - a log jam that will take more than three and a half years to clear from the market, and that doesn't include GSE mortgages.

For decades the GSEs have made it possible for many people to achieve their homeownership goals by reducing the cost of credit and making it more readily available. But in light of the recent financial meltdown, banks and other corporations are calling for reform that they say the Dodd-Frank Act didn't cover. The government is set to release a report on the future of Fannie and Freddie in the coming weeks, but market participants have low expectations for a definitive solution in the report.

FDIC Chairman Sheila Bair warned mortgage bankers that failure to take immediate and decisive action to deal with breakdowns in servicing procedures will trigger a double-dip in U.S. housing markets and keep the industry deeply mired in a cycle of credit distress. Bair's fix includes instituting new fee structures so that servicers aren't forced to cut corners and establishing a claims commission funded by servicers to compensate borrowers who've been impacted by substandard practices.

Ally Financial is withdrawing all foreclosures in Maryland signed by an employee who admitted to being a robo-signer. Jeffery Stephan testified under oath that he signed off on thousands of foreclosure documents every month without verifying their accuracy or signing them in the presence of a notary. Ally has agreed to dismiss and re-file 250 active foreclosure cases in the state that he approved.

Moody's Investors Service has outlined several credit concerns that have led the agency to decline to give its highest ratings to resecuritizations of U.S. residential mortgage-backed securities (RMBS). Moody's says such denials are becoming more and more common. Among the agency's primary concerns are ambiguities in legal documents and uncertainties resulting from foreclosure irregularities.

The Federal Housing Finance Agency (FHFA) on Tuesday said it has directed Fannie Mae and Freddie Mac to work in coordination with FHFA and HUD to consider alternatives for future mortgage servicing structures and fees for single-family mortgage loans. The current compensation plan is typically based on a minimum servicing fee that is a part of the mortgage rate, which FHFA says decreases flexibility for the servicing of non-performing loans.

The national office sector continues to grow after bottoming in the first quarter of 2010, with sales recovery spreading to secondary markets, according to the commercial real estate provider Cassidy Turley. The firm reports that net demand for U.S. office space improved during the October to December timeframe for the third straight quarter. Vacancy rates are down for the first time in more than three years, and rents are stabilizing.