The Three Percent Solution

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Th e M Rep o RT | 55 O r i g i nat i O n s e r v i c i n g a na ly t i c s s e c O n da r y m a r k e t SECONDARY MARKET The laTesT (HARP) and developing plans to cut down on severely delinquent mortgages in the GSEs' portfolios with loan modifications, short sales, and other actions. The next step in FHFA's plan, "reduce," outlines expectations for Fannie and Freddie to reduce their own presence in the mortgage market and boost the role of private capital. Instructions in this category were separate for each GSE: In 2015, Fannie Mae will make credit transfers on reference pools of single-family mortgages with an unpaid principal balance of at least $150 billion, while Freddie Mac is expected to do the same for a balance of $120 billion. The balance requirement for both enterprises will be reviewed and adjusted when needed to reflect market conditions, FHFA said. Finally, both Fannie and Freddie are expected to work with FHFA and each other to build and test a platform designed for a common security between the two of them. While FHFA estimates it will still be years before the development of a common securitization platform (CSP), the agency and the GSEs have already made the first steps by establishing a joint venture— called Common Securitization Solutions (CSS)—to oversee the process. For its part, CSS is tasked with designing the platform, focusing this year on including any functions the GSEs need for their securitization activities and working with them to get input from the public and the mortgage industry. "These objectives will al- low FHFA to work with Fannie Mae, Freddie Mac, and Common Securitization Solutions to build a strong, vi- brant national housing finance market, which will create new homeownership and rental opportunities for existing and potential borrowers," Watt said. report: rBs may Pay more in FHFa settlement GSes may ask for additional penalties after the bank sold $32 billion in faulty mortgage-backed securities to Fannie Mae and Freddie Mac. r oyal Bank of Scotland (RBS) may have to pay additional penalties to settle claims that it sold faulty U.S. mortgage-backed securities in the years leading up to the housing market crash, according to a report from Reuters. RBS had already set aside the equivalent of about $3 billion in U.S. dollars to cover settlement costs relating to the sale of $32 billion worth of faulty mortgage- backed securities to Fannie Mae and Freddie Mac in a case being handled by the U.S. District Court in Connecticut. However, the conservator of the two GSEs, the Federal Housing Finance Agency (FHFA), might ask the bank to pay up to the equivalent of $7.7 billion in U.S. money to settle the claims, according to the report. A spokesperson from FHFA declined to comment on the RBS situation. In June, RBS agreed to pay $99.5 million to settle a separate FHFA suit claiming that the bank sold more than $2 billion worth of faulty mortgage-backed securities to Fannie Mae and Freddie Mac between 2005 and 2007, the years of the "housing bubble" in the U.S. RBS and Nomura Holdings are the last two out of the 18 lenders to settle with FHFA after the agency sued the lenders in 2011 to recoup U.S. taxpayer costs following the government's $188 billion bailout of Fannie Mae and Freddie Mac in 2008. The other 16 lenders have paid about $24 billion to settle claims, includ- ing $9.3 billion paid by Bank of America in March 2014.

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