Secondary Market

Citing "people familiar with the matter," the Wall Street Journal reported Friday that the two GSEs and their conservator are nearing an agreement with lenders that would set clearer definitions of when a loan is considered to be in breach of GSE selling requirements. The agreement could be announced as soon as next week, according to the publication.

William A. Ackman, head of Pershing Square, and Bruce Berkowitz, head of Fairholme Capital, have both added to their respective stakes in the two GSEs. In the last week of September, Judge Royce Lambert threw out lawsuits filed by Fairholme and Perry Capital against the government claiming that the sweeping of GSE profits into Treasury was illegal. The judge ruled the sweeping of the profits was legal under the Housing and Economic Recovery Act.

Hedge fund Perry Capital has appealed a judge's decision to dismiss a lawsuit filed last year over the sweeping of Fannie Mae and Freddie Mac's profits into the Treasury. The investors believe that the diversion of GSE profits created a "windfall" for the government while short changing GSE shareholders.

A ruling issued by a federal judge this week clears the way for investors to proceed with a class-action suit against JPMorgan Chase, meaning that all the investors can be represented by a lead plaintiff in the case. Investors are accusing the bank of misleading them by making false statements regarding the RMBS when the securities were packaged and sold to the investors in 2007, a year before the subprime lending crisis.

After posting a slight increase in July, Freddie Mac's mortgage portfolio declined at an annualized rate of 0.4 percent over the month of August, according to the GSE's latest monthly volume summary. Year-to-date, the portfolio's annualized growth rate has averaged -1.6 percent, bolstered by declines near or higher than 2 percent in each of the first five months of the year.

Fannie Mae's book of business shrank in August at its steepest rate in more than a year, according to the company's latest volume summary. The company reported a compounded growth rate of -4.0 percent in its book for August, putting its total value down to $3.1 trillion. It was the ninth straight month of contraction.

JPMorgan Chase reports it has completed nearly a quarter of its consumer relief obligations required under a landmark mortgage-backed securities (MBS) settlement last year. According to a report issued Wednesday by the settlement's monitor, Joseph Smith Jr., the megabank expects to be credited for more than $862 million it provided through various borrower relief measures in the second quarter.

Judge Royce Lambert dismissed lawsuits filed in 2013 by investors at Fairholme Funds, led by Bruce Berkowitz, and Perry Capital with regards to the government's "sweeping" of GSE profits into the U.S. Treasury. The investors believed that the diversion of GSE profits created a "windfall" for the government while short changing GSE shareholders.

Government-sponsored enterprise Fannie Mae recently confirmed two high-level personnel changes within the organization. Leslie Peeler, SVP in charge of Fannie Mae's National Servicing Organization, is leaving the GSE for a senior position with IBM's mortgage group. Last week, the GSE also confirmed the departure of COO Terry Edwards, scheduled for early 2015.

In a filing with the Securities and Exchange Commission (SEC), Fannie Mae revealed that Terence W. Edwards, currently COO and EVP, has notified the company of his intent to leave sometime during the first half of 2015.