Fannie and Freddie to Bear Cost of Modifications of Own Loans

In its 10-k filing with the Securities and Exchange Commission late last week, Fannie Mae disclosed that the Obama administration expects the company –and presumably Freddie Mac– to pick up the government’s tab of paying both servicer and borrower “incentives” for modifying government-sponsored enterprise-related mortgages.

“We will bear the full costs of these modifications and will not receive a reimbursement from Treasury,” Fannie writes in its filing, noting that these costs will include incentives paid to servicers as well as borrowers over a several-year period. “Fannie Mae, rather than Treasury will bear the costs of these servicer and borrower incentive fees,” the GSE says. The incentives announced by the Obama administration could run as high as $11,000 per successfully modified loan. Separately, Fannie revealed in its new SEC filing that it will play a major role in administrating the Treasury’s Homeowner Affordability and Stability Plan.

SEC and FASB Preparing to Offer Accounting Relief to Mortgage Holders

Pressured by lawmakers to do something to help banks and financial institutions holding large amounts of illiquid mortgages and mortgage securities, the Securities and Exchange Commission and the Financial Accounting Standards Board were moving this week to loosen accounting rules governing write-downs of depressed mortgage assets. The expected actions would allow most institutional MBS investors to avoid taking big hits on their mortgage-related holdings. But critics contend it will do little to restore investor confidence in banks or Wall Street firms that have large exposure to mortgage-related losses.