MReport March 2017

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TH E M R EP O RT | 63 SECONDARY MARKET THE LATEST O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T Freddie Mac Portfolio Growth at 8-Year High The GSE's mortgage portfolio grew at an annualized rate of 10 percent at the end of last year. F reddie Mac's mortgage portfolio grew at an an- nualized rate of 10 percent for December, according to the GSE's Monthly Volume Summary. This is a 6.5 percent increase from November's annual - ized growth rate and the highest rate of any month last year. In fact, December's increase is the highest monthly growth rate that has been seen since March of 2009, when the portfolio grew at an impressive monthly rate of 21 percent. The month with the second- highest level of growth in 2016 was August at 8.2 percent, while the month with the lowest rate of growth was April, when the port - folio contracted by 1.2 percent. The overall growth rate of the portfolio for the entire year was 3.6 percent. The summary noted that the single-family refinance-loan pur - chase and guarantee volume was $23.3 billion in December, which makes up 60 percent of Freddie Mac's total single-family mortgage portfolio purchases and issuances. Relief refinancing made up ap - proximately 4 percent of the total single-family refinance volume. The single-family delinquent rate on mortgages backed by Freddie Mac decreased from 1.03 percent in November to 1.00 percent in December. The total number of loan modi - fications completed on Freddie Mac-backed loans came in at 3,672 for December and 43,191 for the entire year. The overall net increase for the year came in at $69,827 for an ending balance of $2,011,414. FHFA to Sub as Plaintiff for Fannie Mae Shareholders The FHFA supersedes shareholders' claims in a case alleging Deloitte & Touche engaged in negligent auditing practices. T he Federal Housing Finance Agency (FHFA) is substituting for Fannie Mae shareholders as the plaintiff in a lawsuit against ac - counting firm Deloitte & Touche accusing the company of negligent auditing practices that resulted in millions of dollars in losses to the shareholders. A federal judge in the U.S. District Court for the Southern District of Florida ruled that the FHFA, as conservator of Fannie Mae since September 2008, owned all claims against Deloitte, citing a provision of the Housing and Economic Recovery Act (HERA) of 2008. At the same time, the court denied the motion of the Fannie Mae shareholders to remand the case. "The FHFA moves to substi - tute as plaintiff, arguing that the FHFA succeeded to all the rights of Fannie Mae's stockholders under HERA's succession clause, including the plaintiffs' rights to bring this suit," Judge Robert N. Scola wrote in the decision, stat - ing in the conclusion, "Because Deloitte had met its burden in establishing that one of the plain- tiffs' claims arise under federal law and the plaintiffs' deriva- tive claims belong to the FHFA under HERA, the Court denies the Plaintiffs' Motion to Remand and grants the FHFA's Motion to Substitute as Plaintiff." The FHFA declined to comment on the matter, and Deloitte did not immediately respond to a request for a comment. The Wall Street Journal reported that the FHFA is unlikely to continue with the suit now that the agency owns the Fannie Mae shareholders' claims. The Fannie Mae sharehold - ers claim in their complaint that Deloitte failed to properly audit the GSE's financial statements, ac- cusing the accounting firm of giv- ing its "seal of approval to Fannie Mae's grossly misstated financial statements" and stating that "as a direct result of Deloitte's negligent accounting and auditing and its role in assisting FHFA, Treasury, and Fannie Mae's directors and officers in violating their fiduciary duties, plaintiffs suffered losses of hundreds of millions of dollars." Fannie Mae and fellow GSE Freddie Mac received a combined bailout of $187.5 billion from tax - payers in 2008 in order to remain solvent, at which time they were taken under conservatorship by the newly-created FHFA. In 2012, both Fannie Mae and Freddie Mac became profitable again, but the government amended the terms of the bailout to sweep all GSE prof - its into Treasury. The so-called "net worth sweep" has prompted no fewer than two dozen lawsuits by GSE shareholders who believe they are entitled to some of these profits. Some of the suits have gained traction in courts, but none have been decided in the share - holders' favor as of yet. The Fannie Mae shareholder suit was not the first GSE suit against Deloitte. Freddie Mac sued the accounting firm in 2014 for $1.3 billion, accusing them of negligence regarding the repre - sentation of mortgage loans that Deloitte audited in the years lead- ing up to the crisis. Freddie Mac purchased the toxic loans from now-defunct servicer Taylor Bean & Whitaker based on Deloitte's audits and claims to have suffered millions of losses as a result. Both parties agreed to dismiss the suit without prejudice in January 2016, a month before the case was scheduled to go to trial. "The CFPB has been a critical partner to Massachusetts in protecting students, homeowners, the elderly, veterans and all consumers against unfair, deceptive and abusive financial practices and products." —Maura Healey, Massachusetts Attorney General

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