June 14, 2011 (Jeff Alan)
The Federal Housing Finance Agency (FHFA) released its third Report to Congress, detailing the findings of the agency’s 2010 annual examinations of Fannie Mae, Freddie Mac, the 12 Federal Home Loan Banks (FHLBanks), and the FHLBanks’ Office of Finance. In the report, FHFA says that since being under conservatorship in 2008, Freddie Mac and Fannie Mae remain “critical supervisory concerns.”
With $28 billion in losses, the report finds the key challenges facing Freddie Mac and Fannie Mae in the future are credit risk, operation risk, modeling risks and retention of qualified leadership and personnel.
Losses were substantially less than the 93.6 billion reported in 2009.
Tighter underwriting standards have also lead to higher quality loans as the average loan-to-value ratio of mortgages acquired in 2010 remained below 70 percent, 5 percent lower than the levels experienced before conservatorship.
The report also finds FICO scores on mortgages obtained in 2010 were 35 to 45 points higher than they were before conservatorship.
Freddie Mac and Fannie Mae’s efforts to keep Americans in their homes paid off as 950,000 alternative actions to foreclosure were completed in 2010 including 575,000 loan modifications, three times the amount achieve in 2009.
Beyond Freddie Mac and Fannie Mae, the report discloses that the 2010 financial condition and performance of the FHLBanks has stabilized though several of the FHLBanks continue to be negatively affected by their exposure to private-label mortgage-backed securities.
Despite this, All FHLBanks recorded positive annual earnings in 2010 though there were losses by some FHLBanks in individual quarters. Total advances (loans to members) declined from $631 billion at year end 2009 to $479 billion at year end 2010.
Total assets of the 12 FHLBanks also declined from $1.02 trillion at the end of 2009 to $878.3 billion at the end of 2010.
Tags: FHFA, Freddie Mac, Fannie Mae, FHLBanks, Report to congress, credit risk, operation risk, modeling risks, underwriting standards, mortgage-backed securities