Lenders are showing “restrained enthusiasm” for the new rep-and-warrant policy changes, according to Jeremy Potter, general counsel and chief compliance officer with Norcom Mortgage. The changes were made to help reduce uncertainty in addressing lenders’ concerns about when they might be asked to repurchase a loan. “On the one hand, you had some restraint where the lender’s reaction was ‘what am I really getting and how is this going to actually materialize?’ But on the other hand, there is the enthusiasm about an example of a regulator, investors and the lender community working together to make a significant advancement to accomplish goals that are good for everyone,” he said.
In tandem with its efforts to build a common securitization platform, the Federal Housing Finance Agency provided an update on its progress in developing a single security for the GSEs last week. “The single-security project is intended to improve the overall liquidity of Fannie Mae and Freddie Mac mortgage-backed securities, and lower costs for borrowers and taxpayers,” said the FHFA. The recent update primarily focused on the decisions it made based on the 23 response letters it received and dialogue the agency had with industry leaders after initiating a request for input last year. While representatives from the Federal Home Loan Banks suggested that the FHLBank system become an eligible issuer of single securities, the FHFA declined that proposal.
The Senate Banking, Housing and Urban Affairs Committee this week passed the Financial Regulatory Improvement Act of 2015 by a 12 to 10 margin along party lines. The measure, introduced by committee Chairman Richard Shelby, R-AL, includes a number of GSE provisions. Title VII of the bill prohibits the use of increases in Fannie Mae and Freddie Mac guaranty fees to offset outlays or reductions in revenues for “any purpose other than enterprise business functions or housing finance reform as passed by the Congress in the future.” The bill was approved by the Senate Banking, Housing and Urban Affairs Committee. Another provision would prohibit the U.S. Treasury from selling or...
Nomura Holdings Inc. is mulling an appeal following last week’s court order that it, along with RBS Securities, pay Fannie Mae and Freddie Mac a total of $805.1 million to resolve claims arising from the pre-crisis sale of non-agency MBS to the government-sponsored enterprises. Judge Denise Cote of the U.S. District Court for the Southern District of New York rendered the judgment May 11 after a three-week bench trial in which she found Nomura and RBS liable for the claims brought by the Federal Housing Finance Agency. The MBS were backed by mortgages with an unpaid principal balance of about $2.05 billion at the time of purchase. Nomura and RBS, which underwrote four of the seven MBS deals at issue, provided...
Issuance of conduit commercial MBS has been significantly lower than expected this year, according to Bank of America Merrill Lynch. Some of the expected volume appears to have shifted to single-asset deals, while a number of investor-related factors have also likely limited issuance. BAML expected $85.0 billion in conduit commercial MBS to be issued this year, a nearly 50 percent increase compared with 2014. However, just $23.0 billion in conduit commercial MBS had been issued this year through mid-May, suggesting that volume might stay level compared with 2014. A number of factors have shifted...
The Senate Banking, Housing and Urban Affairs Committee approved a Republican regulatory relief bill on a strictly partisan vote late this week, with all of the mortgage-finance provisions previously reported intact. Sen. Pat Toomey, R-PA, momentarily offered Fannie Mae and Freddie Mac a “get out of jail free” card, in the form of an amendment addressing capital requirements for the two government-sponsored enterprises, then withdrew it, presumably for use at a future point in time. “This is...
Industry participants, both on their own and with help from the Treasury Department, continue to work on reforms to attract investors to buy new non-agency MBS. Servicing standards will likely play a key role in the reforms, though progress has been slow. The Structured Finance Industry Group published its first RMBS 3.0 “green paper” in August 2014 with a follow-up in November. The Treasury Department has been working with industry participants toward the issuance of a benchmark non-agency MBS since at least September 2014. Analysts at Fitch Ratings stressed...
Commercial banks and thrifts reported robust growth in their MBS portfolios during early 2015, including a special appetite for Ginnie Mae MBS, according to a new Inside MBS & ABS analysis of call-report data. Commercial banks and thrifts held $1.579 trillion of residential MBS at the end of March, a 2.6 percent increase from the previous quarter. It was the industry’s biggest MBS portfolio since the third quarter of 2012, when banks and thrifts held a record $1.617 trillion of mortgage securities. The biggest gain was...[Includes two data tables]
In April, the average daily trading volume in agency MBS fell to $187.8 billion, the worst reading of the year and a possible harbinger of problems to come. One market participant, speaking under the condition his name not be used, likened it to MBS buyers “going on strike.” He added: “Right now, you have an illiquid market, and that’s not a good thing.” In December of last year, the MBS trading volume was...
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