The House Ways and Means Committee this week extended until March 30, 2012, the period of time in which it can consider legislation that would lay the legal and regulatory foundation for a covered bonds market in the U.S. H.R. 940, the United States Covered Bond Act of 2011, was introduced March 8, 2011, by Rep. Scott Garrett, R-NJ, and reported out of the House Financial Services Committee on June 22, then referred to Ways and Means for consideration of its potential effect on the federal budget. Late last month, the Congressional Budget Office issued a cost estimate of the legislation. “CBO...

Principal reductions hold the potential for a positive impact on the mortgage market by preventing some foreclosures, but residential MBS investors stand to lose from an improperly implemented, wide-ranging loan modification effort, according to Fitch Ratings. The mandated principal reduction provisions in the recent $25 billion settlement involving state attorneys general, the federal government and the five largest mortgage servicers appear to be a “sensible approach” as loan modifications with principal reductions have performed better than other types of mods, but Fitch noted the benefit comes with a...

Though Federal Reserve Chairman Ben Bernanke stated last week that the regulatory agencies would not hit the July 21 deadline for a finalized Volcker rule, such news only leaves the securitization industry with more time to stew in anxiety about a regulation that many feel should not apply to them. The controversial Volcker rule, one of the many required by the Dodd-Frank Act, is designed to limit the ability for financial institutions to benefit financially by shorting their customers, through the prohibition of federally insured banks engaging in proprietary trading, covered transactions with hedge funds or...

Fannie Mae has updated its premium recapture policy by establishing standards for remediation in cases where a lender exhibits a peculiar prepayment behavior. Under the current guide, Fannie Mae has the right to analyze MBS that have high levels of prepayments, including a review of the lender’s origination and refinancing activities to ensure compliance with the government-sponsored enterprise’s requirements. If a lender shows an unusually high level of prepayments, Fannie may restrict any refinancing practice that might inappropriately affect the prepayment pattern for Fannie mortgages...

Ginnie Mae and Credit Suisse struck a “pledge acknowledgement agreement” last week that industry observers think will increase liquidity for mortgage lending and servicing, especially for smaller, independent players, attract more Ginnie lenders and issuers to the marketplace, and lower the overall costs of funding FHA/VA originations. Late last week, Ginnie announced that Credit Suisse has become the first institution to adopt a recently-revised pledge acknowledgement agreement. Through this arrangement, mortgage securities issuers will now be able to more easily tap funds at lower...

The two sibling GSEs experienced a divergent earnings period during the fourth quarter of 2011, as Freddie Mac posted a quarterly gain, on paper anyway, while Fannie Mae announced losses, albeit at a slower pace, in a year that drove both companies even deeper into the red.Freddie posted net income of $619 million during the three month period ending Dec. 31, 2011, compared to a net loss of $4.4 billion during the third quarter. For the full year, the company reported a net loss of $5.3 billion, compared to a net loss of $14.0 billion for the full-year 2010.

A legislative effort to extend Fannie Mae and Freddie Mac’s guarantee fee hike beyond 2021 to pay for the Gulf Coast cleanup was averted this week following some behind-the-scenes lobbying, but industry insiders remain wary of future attempts by lawmakers to milk the GSEs for cash. An amendment to the Restore the Gulf Coast Act of 2011 would have used revenue generated from GSE g-fees to help pay for the continued clean up from the BP Gulf Coast oil spill. Sponsored by Sens. Mary Landrieu, D-LA, and Richard Shelby, R-AL, the bill would establish a trust fund paid for partly by fines levied against the oil company.

The advance business for the 12 Federal Home Loan Banks continued to shrink again in 2011, dropping 12.6 percent from the previous year to $418.2 billion, according to preliminary figures released by the FHLBank Office of Finance. However, advances did increase slightly from the third to the fourth quarter. The overall 2011 decline came through “continued low demand by member institutions resulting from high levels of liquidity in the market, as well as high levels of deposits and low loan demand experienced at member institutions,” the OF explained.

The Federal Housing Finance Agency is proceeding with its initiative to dispose of GSE and government-held real estate-owned properties even as some within the industry question whether such a wide-spread REO program is necessary. Last week, the FHFA announced the first pilot transaction under its REO initiative, which is targeted to the country’s “hardest-hit” metropolitan areas, including Atlanta, Chicago, Las Vegas, Phoenix and parts of Florida.

Fannie Mae announced this week it will soon implement changes to its Lender-Placed Insurance requirements by overseeing the “forced-placed” policies itself instead of allowing banks and other financial institutions to do so. In a departure from current practices, Fannie said it would solicit proposals from insurance companies for its LPI business in an effort to “significantly reduce costs” to homeowners, taxpayers and to the GSE itself.