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» FANNIE MAE ANNOUNCES 2012 SERVICER SCORECARD RESULTS Fannie Mae unveiled the 2012 program results for the Servicer Total Achievement and Rewards (STAR) scorecard. The STAR program was introduced to establish servicing standards and recognize Fannie Mae servicers' performance. The scorecard component of the program measures a servicer's ability to manage credit performance by observing factors such as roll rates, solution delivery, workout effectiveness, and timeline management. Final STAR program designations, set to be released in April, will evaluate customer service and foreclosure prevention, as well as operational assessments of the servicer's processes, policies, and capabilities. "STAR is one of the many ways that we are helping servicers improve their work with homeowners," said Leslie Peeler, SVP of Fannie Mae's national servicing organization. "In the peer group representing our largest servicers we observed improvement in the delivery, of home retention solutions from our top and bottom performing servicers. Servicers understand the importance of delivering solutions to homeowners and are focused on achieving better results." Servicers can earn up to five stars, but only those with three or more stars are recognized. Three stars indicate above median results. The following servicers produced results on the STAR scorecard at or above median levels compared to their peers in 2012: » Ally Bank » Associated Bank » Branch Banking and Trust Company » Capital One » Colonial Savings » EverBank » Fifth Third Bank » Green Tree Servicing » M & T Bank » Nationstar Mortgage » Navy Federal Credit Union » PHH Mortgage Corporation » RBS Citizens » Regions Bank » Seterus, Inc. » Third Federal Savings and Loan » Trustmark National Bank » Wells Fargo Bank VISIT US ONLINE @ DSNEWS.COM RATINGS AGENCY WARNS GSES' KEY ROLE IN RECOVERY LIMITS MOTIVATION FOR REFORM As the private sector struggles with regulatory uncertainty, Fannie Mae and Freddie Mac will continue to maintain their dominant role in the housing market, according to a report from Fitch Ratings. Since the GSEs act as key players in the market's fragile recovery, political motivation for far-reaching GSE reform has been limited, the ratings agency explained. Fitch noted the GSEs saw stronger operating performance over the last three quarters of 2012. Amid the backdrop of rising home prices, Fannie Mae and Freddie Mac have been able to fund dividends to Treasury without requiring additional capital draws in recent quarters. Although regulators and politicians emphasize the need for the private sector to return to the mortgage market, Fitch said "results have been disappointing." Privatelabel securities issued in 2012 totaled $6 billion while nine out of 10 mortgages have some form of government backing, according to Fitch. In order to attract private capital, Fitch says guarantee fees (g-fees) need to increase. In 2012, the GSEs raised their g-fees twice, and the ratings agency expects the trend to continue in 2013. Though, "Fitch believes that g-fees may need to rise materially before nonagency execution becomes a convincingly viable alternative," the agency said. Fitch noted other "hurdles" are still inhibiting private capital from reentering the market. "Bank balance sheet capacity for mortgage assets is constrained by impact on leverage ratios, Basel III liquidity rules, interest rate risk implications, and continued regulatory uncertainty," Fitch stated. The agency says uncertainty surrounding risk retention rules as well as the limited supply of high-quality mortgage loans have also limited activity from the private sector. Overall, Fitch says appetite from private investors is likely to remain "muted." DEMARCO OUTLINES GOALS FOR GSES Edward DeMarco, acting director of the Federal Housing Finance Agency (FHFA), released his 2013 priorities for the GSEs last month. DeMarco anticipates a gradual reduction of the GSEs' presence in the market, with this year's goals largely building on last year's. "Despite some signs of normalization in the housing market, our nation finds itself in the uncomfortable position of having over 90 percent of new mortgage originations supported by the federal government," DeMarco said. DeMarco does not anticipate either Fannie Mae or Freddie Mac will emerge from conservatorship and return to the private sector. "Of the various legislative proposals that have been introduced in Congress, none of them envision the enterprises exiting conservatorship in their current corporate form," he said. As such, FHFA's goals for 2013 expand on last year's three main goals of building an infrastructure for the future of the secondary market, contracting the GSEs' role in the market, and maintaining the GSEs' foreclosure prevention and credit availability efforts. To achieve these goals, DeMarco proposes several actions, including continuing to raise the GSEs' guarantee fees in order to attract private capital to the mortgage market. DeMarco also set a goal of $30 billion of unpaid principal balance in credit risk sharing in the single-family market along with a 10 percent decline in multifamily business activity. As part of establishing a new infrastructure for the secondary market, FHFA intends to create an entirely new business entity this year. This business will function completely separate from Fannie Mae and Freddie Mac. "[T]he overarching goal is to create something of value that could either be sold or used by policymakers as a foundational element of the mortgage market of the future," DeMarco said. FHFA also intends to continue creating standard industry guidelines through the Uniform Mortgage Data Program (UMDP). Fannie and Freddie are also tasked with revising their representation and warranty framework. And lastly, the GSEs will continue "maintaining foreclosure prevention activities, and promoting market stability and liquidity," DeMarco said. 21

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