With an enormous volume of unresolved mortgage buyback demands continuing to hang menacingly over the industry’s head, vendor providers are hustling to develop viable solutions to help lenders get a handle on the risk and reduce their liability. The latest case in point is a new Quality Control Service for Correspondents from Melbourne, FL-based ISGN Corp., which provides end-to-end technology solutions and services to the U.S. mortgage industry. The company’s new offering is aimed at correspondent lenders with warehouse lines of credit, and it reviews and assesses all quality control points in...

A working paper authored by two Federal Reserve Bank of New York economists found that refinancing can be “fruitfully employed” as a tool for loss mitigation by investors and lenders. In their paper, “Payment Changes and Default Risk: The Impact of Refinancing on Expected Credit Losses,” Fed economists Joseph Tracy and Joshua Wright found that the relationship between borrowers’ monthly payments and future credit performance is important for the design of an initiative such as the Home Affordable Refinance Program. The authors used a competing risk model to estimate the sensitivity of default risk...

Is the end near for thrifts? Analysts at Keefe, Bruyette & Woods seem to think so. This week’s announcement by federal banking regulators of three proposed rules that would revise capital requirements may be the death blow to thrifts as we know them, said KBW equity analysts Frederick Cannon, Brian Kleinhanzl and Matthew Dinneen. The analysts contended that regulatory changes following the financial crisis and the announcement of new capital requirements have ended the viability of the thrift industry. Issued jointly by the Federal Reserve Board, the Federal Deposit Insurance Corp. and the Office of the...

Banks reported higher fair market values on their mortgage servicing rights assets during the first quarter of 2012, according to a new Inside Mortgage Trends analysis of call report data. Financial institutions filing bank call reports said they serviced $5.786 trillion of single-family mortgages for other investors – mostly through mortgage securitization activities – as of the end of March. They put a fair market value on these MSR assets of $48.69 billion, or 0.841 percent of the unpaid principal balance. At the end of December, the ratio of MSR fair value to mortgages...(Includes one data chart)

An ambitious public-private partnership hopes to harness the legal standing of the state and private money to solve the issue of negative equity by condemning underwater homes. Mortgage Resolution Partners is a San Francisco-based firm that works to, in words from its own website, “keep as many homeowners with underwater mortgages in their homes as possible, aiding in the stabilization of local housing markets and economies.” To create stability, however, Mortgage Resolution Partners intends to shake things up. According to a Reuters report, MRP proposes to partner with local governments and...

Since the start of conservatorship in 2008, government wards Fannie Mae and Freddie Mac have completed more than 2.3 million foreclosure prevention actions, according to the Federal Housing Finance Agency. These actions include 1.1 million permanent loan modifications. Nine months after modification, less than 15 percent of the loans modified in the second quarter of 2011 had missed two or more payments, while half of all borrowers who received loan mods in 1Q12 had their monthly payments reduced by more than 30 percent. Consumer credit performance deteriorated in May largely because of mortgages, according to...

The three federal banking agencies over the past week released proposed rules to implement the Basel III regulatory capital reforms and changes required by the Dodd-Frank Act that many observers predict will influence bank participation in the mortgage market. The proposed changes would increase bank capital requirements and re-calibrate risk-based capital charges. One of the key changes stemming from the Basel III accord reached by international bank regulators would limit the amount of mortgage servicing rights, along with investments in certain non-consolidated entities and deferred taxes, to no more...

The agency mortgage servicing market continued to grow during the first three months of 2012, although there is some evidence that banks are beginning to pull back from the sector. The Federal Reserve late last week reported that the total supply of home mortgage debt outstanding fell by 0.9 percent during the first quarter. It marked the 16th consecutive quarterly decline since the first quarter of 2008, when the housing market began to crater. The agency estimated that $10.179 trillion of home loans were outstanding at the end of March, the lowest level since...(Includes three data charts)

Mortgage industry officials are anxious about the Consumer Financial Protection Bureau’s upcoming rulemaking on mortgage servicing and have provided some empirical data and a number of principles they think the bureau ought to follow. The American Bankers Association recently provided the CFPB with excerpts from its annual real estate survey to influence the CFPB’s determination as to whether it should exempt, in whole or in part, certain categories of servicers or servicing arrangements from the bureau’s upcoming servicing requirements. Of the 186 banks that participated, roughly 86 percent had assets of...

The Department of Housing and Urban Development is working on a mortgagee letter to guide FHA-approved lenders on their use of credit overlays to protect themselves from potential liability in single-family mortgage transactions. In remarks at a Women in Housing and Finance meeting this week in Washington, DC, Acting FHA Commissioner Carol Galante said the department is concerned about FHA lenders boosting credit score requirements much higher than what the FHA would allow. Galante said lenders are requiring credit scores of 700 and higher, well above the traditional FHA score requirement of 640...