Congress may be no closer to solving the problem of Fannie Mae and Freddie Mac than it was when the two government-sponsored enterprises were put in conservatorship in 2008, but many observers say the capabilities of the two GSEs should be preserved and improved. “Energy spent trying to get rid of Fannie Mae and Freddie Mac is a waste,” said Sean Dobson, the CEO of Amherst Securities Group, at the American Securitization Forum Annual Meeting this week in Washington. The GSEs still have sizable infrastructure for effective securitization, and “it would be a shame to take all of that and throw it away,” he...

Even as the Federal Housing Finance Agency deliberates writedowns of Fannie Mae and Freddie Mac mortgages, the agency has agreed to allow the government-sponsored enterprises to participate in a California program that applies principal reduction in modifying distressed loans. The FHFA has confirmed Fannie and Freddie’s participation in the California Housing Finance Agency’s Keep Your Home California Program, a $2 billion foreclosure prevention effort established under the U.S. Treasury’s Hardest Hit Fund. Earlier this month, state officials announced they are dropping the requirement from the...

A costly difference of interpretation between the Mortgage Guaranty Insurance Corp. and Freddie Mac over a pool insurance dispute has prompted the mortgage insurer to file suit against the government-sponsored enterprise and its regulator, the Federal Housing Finance Agency. Filed earlier this month in the U.S. District Court of Milwaukee, where the company is based, the legal dispute concerns differing readings of the “aggregate loss limit” for insurance policies MGIC provides on 11 pools of Freddie loans. The aggregate loss limit is about $535 million higher under Freddie’s...

With banks under increased pressure to manage their exposure to risks related to mortgage-backed securities and whole loans, Moody’s Analytics has updated its risk and capital allocation tool so clients can run their mortgage portfolio under various stressed scenarios and get a better handle on potential losses. The latest iteration of the Mortgage Portfolio Analyzer features an enhanced framework for modeling stressed macroeconomic scenarios, defaults, prepayments and severities. The tool that the firm has put together can “simultaneously benefit institutions that have portfolios of not...

Mortgage buybacks may have declined significantly during the first quarter of 2012, but a new Inside Mortgage Trends analysis shows that the volume of unresolved repurchase demands continued to set new record highs. Bank call-report data show that financial institutions reported a total of $4.12 billion in mortgage repurchases and indemnifications during the first quarter of this year. That was down 23.0 percent from the fourth quarter of 2011 and the lowest quarterly volume since the beginning of last year. It is particularly encouraging since the first-quarter data...(Includes two data charts)

Banks and thrifts added some $67.2 billion in residential MBS to their investment portfolios during the first quarter of 2012, according to a new Inside MBS & ABS ranking and analysis. The increase amounted to a 4.3 percent gain from bank and thrift MBS holdings at the end of 2011, and raised the industry’s total investment to a record $1.634 trillion. It marked the first time since 2004 that banks and thrifts owned more than a quarter of the MBS market. The biggest increase was in holdings of agency pass-through securities, which rose 6.2 percent from the fourth quarter to $974.4...(Includes two data charts)

Ally Financial negotiated an $8.7 billion settlement with investors in non-agency MBS issued by Residential Capital before putting the company, one of the pioneers in the securitization of jumbo, Alt A and subprime mortgages, into bankruptcy. Long before ResCap’s bankruptcy filing early this week, trustees for outstanding non-agency MBS had already been instructed by 17 investors to sue Ally Financial for compensation over alleged violations of ResCap representations and warranties. The deal was reached shortly before the filings, according to a source close to the matter. Ally said that some 290 MBS trusts...

A proposal from the Financial Industry Regulatory Authority to begin disseminating data for agency MBS traded as specified pools could compromise the confidentiality of market participants and discourage them from future participation, according to the Securities Industry and Financial Markets Association. The FINRA wants to implement shorter reporting timeframes for MBS-SP transactions (initially two hours, then one hour), as well as real-time dissemination of trade information. Volume information would be capped at $10 million. Trades above that amount would be displayed as “10+.” “Our dealer and...

The government overseer of Fannie Mae and Freddie Mac wants to help trim the footprint of the two government-sponsored enterprises by selling credit risk to private investors, but a top public policy analyst questions how effective such efforts will be in bringing private capital back to residential mortgage markets. “The basic business model of credit-risk insurance doesn’t just make sense,” said Karen Shaw Petrou, managing partner at Federal Financial Analytics, a think-tank in Washington, DC. “Because of the damage done in the run-up to the crisis, traditional insurers are at great risk of being...

This week, Fitch Ratings downgraded Washington Mutual’s covered bonds to ‘AA-’ from ‘AA’ and placed them on rating watch negative, after last week’s downgrade of the issuer default rating of the program sponsor, JPMorgan Chase Bank. That rating action followed JPMorgan Chase’s disclosure last week of a $2 billion trading loss on its synthetic credit positions in its chief investment office. The positions were intended to hedge JPM's overall credit exposure, particularly during periods of credit stress. That loss estimate has since grown to $3 billion, it was reported this week. The JPMorgan...