Banks, thrifts and credit unions expanded their stakes in the residential MBS market over the first half of 2011 as most other major investor classes pulled back from the market, according to a new analysis by Inside MBS & ABS. But the profile of the MBS investment community will likely continue to change as the Federal Reserve has opted to resume buying agency MBS in an effort to stimulate the economy by pushing long-term interest rates lower. While the result of resumed Fed MBS purchases is uncertain, the Federal Open Market Committee’s decision to reinvest payments on the Fed’s agency MBS back into...(Includes one data chart)
A proposal from federal regulators to change servicer compensation on future Fannie Mae and Freddie Mac MBS to a fee-for-service model could also end up addressing a major investor beef about the non-agency MBS market: poor servicing of distressed loans and misaligned interests. The Federal Housing Finance Agency this week released a discussion paper outlining a radical change from an existing system that pays Fannie and Freddie servicers a minimum servicing fee regardless of the loan status. The proposed system features a low flat fee for handling performing loans with increased compensation for...
Wall Street MBS insiders met this week to talk about making Fannie Mae and Freddie Mac MBS backed by high loan-to-value refinance mortgages eligible for the to-be-announced market. The Securities Industry and Financial Markets Association held a telephone conference call to discuss the issue, a SIFMA representative confirmed, but the group declined to provide any details. Mortgages with LTV ratios above 105 percent can be sold to Fannie Mae and Freddie Mac under the Home Affordable Refinance Program, but these loans must be pooled in separate MBS that are not eligible for the TBA market. HARP loans with...(Includes one data chart)
The Treasury Market Practices Group late last week clarified its recommended fails charge trading practice for agency MBS to limit the scope to pass-throughs, where fails are most likely to happen. “The agency debt and agency MBS trading practice has been updated to reflect the TMPG’s recommendation that a fails charge apply to agency pass-through MBS issued or guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae,” the group said. The original recommendation was that the charge apply to agency MBS issued or backed by Fannie, Freddie and Ginnie Mae, which also issue most REMICs backed by agency pass-throughs. The TMPG has not...
The share of mortgage loans that were held in portfolio rather than sold into the secondary market rose for the second consecutive year in 2010, but that may have more to do with the peculiarities of the rules for complying with the Home Mortgage Disclosure Act. A Federal Reserve analysis of the lastest HMDA data found that portfolio lending, especially involving owner-occupied refinance loans, has risen since the beginning of 2009 but is still far short of the levels portfolio lenders achieved in 2004 and 2005. Overall, originators held a total of 1.30 million mortgages in portfolio in 2010, with...
The Securities and Exchange Commission is considering launching a civil injunctive action against Standard & Poor’s Rating Services, alleging violations of federal securities laws with respect to the company’s ratings for a 2007 collateralized debt obligation. According to a Form 8-K filing this week by McGraw-Hill, the rating service’s parent, the federal agency is looking into S&P’s rating of Delphinus CDO 2007-1, which was to be mostly backed by non-agency residential MBS. “In connection with the contemplated action, the [SEC] staff may recommend that the commission seek civil money penalties, disgorgement of fees and...
Information sharing and the potential erosion of confidentiality and privileged protection will become critically important for the industry as it struggles to keep up with all of the compliance challenges it will face, especially where the new Consumer Financial Protection Bureau is involved. “What scares me more than anything [about the CFPB] is the information-sharing stuff, because they’ve committed themselves to sharing information with the state attorneys general and the banking agencies,” Larry Platt, practice area leader with K&L Gates’ financial services practice, told attendees at a mortgage regulatory conference sponsored in the nation’s capital last week by SourceMedia. “That’s really worrisome because that’s a portal to banks that, in theory, they didn’t otherwise have.”
Fair lending, along with unfair, deceptive and abusive acts and practices (UDAAP), will become increasingly significant and potentially more problematic for the mortgage lending community as regulators at the Consumer Financial Protection Bureau pay more attention to such issues going forward, a top consultant told industry representatives last week. “The keys for mortgage lending, from the enforcement side, are going to be fair lending – the Community Reinvestment Act and fair lending have become very entwined – and UDAAP,” said Jo Ann Barefoot, co-chair of Treliant Risk Advisors and former deputy comptroller of the currency, to attendees of a mortgage regulatory conference sponsored in the nation’s capital by SourceMedia.
The 14 mortgage servicing firms hit by the enforcement actions brought by the Federal Reserve and the Office of the Comptroller of the Currency can expect to see soon a new process by which individual borrowers facing foreclosure can request an independent review, outgoing Acting Comptroller of the Currency John Walsh told industry representatives last week. “As we explored the best means of ensuring that injured homeowners had the opportunity to seek relief, it became clear that what was needed was a robust, transparent and accessible complaint process that will give borrowers the opportunity to request an independent foreclosure review,” Walsh said at a mortgage regulatory forum sponsored by SourceMedia. “I’m happy to say in the next several weeks you’ll see the roll out of just such a process.”
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