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Volume 2012 - Number 1

January 6, 2012

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Non-Mortgage Securitization Posts Solid Recovery In 2011, But MBS Production Fell Short of 2010

The securitization market produced $1.182 trillion of new residential MBS in 2011, a sharp 16.6 percent decline from the year before, according to a new Inside MBS & ABS analysis. Despite a strong finish in the fourth quarter, when MBS production rose 33.8 percent from the previous three-month period, mortgage securitization activity fell for the second year in a row and reached the lowest annual output in over a decade. The non-mortgage ABS market was relatively stronger. Total issuance for the year came to $126.8 billion, a 15.7 percent increase over 2010. Most of the...(Includes one data chart)

Fannie, Freddie Announce Guarantee Fee Increase, Analysts Predict Further Hikes

The Federal Housing Finance Agency’s announcement last week that Fannie Mae and Freddie Mac will increase their guarantee fees on new single-family MBS is likely just the first step in a progression of fee hikes over the next two years, MBS analysts predict. The across-the-board 10 basis point increase in guarantee fees for single-family MBS will take effect April 1, according to announcements by the two government-sponsored enterprises this week. The fee hike implements provisions in the Temporary Payroll Tax Cut Continuation Act of 2011, H.R. 3765, passed by Congress and signed by...

FHFA Fee-for-Service Compensation Proposal Would Hurt TBA Market Liquidity, Raise Costs

The mortgage securitization and servicing industries say proposed changes to the servicing compensation model for Fannie Mae and Freddie Mac securities would have a negative effect on liquidity in the to-be-announced market, hurt investors in agency MBS and increase the cost of mortgage credit for borrowers. The Federal Housing Finance Agency released a discussion paper last fall that outlined two potential new approaches to servicing compensation: a fee-for-service approach favored by the two government-sponsored enterprises, and a reserve account approach developed by lender...

Dockets of MBS Lawsuits Continue to Swell; Wells Fargo New Target of Investor Group

Gibbs & Brun, the Houston-based law firm that spearheaded a massive investor lawsuit against Bank of America, has drawn a bead on Wells Fargo. The company announced this week that its non-agency MBS investor clients have asked two trustees – U.S. Bank and HSBC – to investigate whether ineligible mortgages were pooled in some $19 billion of Alt A and jumbo MBS issued by Wells Fargo between 2005 and 2007. Some 48 securitization trusts are covered by the action, and Gibbs & Brun said it represented investors who collectively held over a quarter of the voting rights in those trusts. “Clients...

Fed Proposal Deems Government-Backed MBS as High Quality Asset But Unclear About GSE MBS

MBS issued or guaranteed by the U.S. government will continue to maintain a zero-risk weighting under the Federal Reserve’s proposed supervisory rules for large bank holding companies, but that won’t necessarily include Fannie Mae or Freddie Mac MBS. The Fed proposal includes a wide range of issues such as capital, liquidity, credit exposure, stress testing, risk management and early remediation. It applies to bank holding companies with assets of $50 billion or more and non-bank institutions that could pose systemic risk to the financial system. The proposal reflects substantially all of the...

MBS & ABS Issuance at a Glance

One page of issuance data

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Are current mortgage underwriting standards too tough?

Yes, they don’t reflect current market conditions and need to be adjusted to allow borrowers with below 700 FICO scores and smaller downpayments to qualify for mortgages.
Yes, and something needs to be done to significantly reduce repurchase or buyback risk so that lenders don’t apply even tougher underwriting overlays.
No, the standards are appropriate given current risks and the major default problems the mortgage market has experienced over the past several years.

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