Non-prime mortgages owned or guaranteed by Fannie Mae and Freddie Mac continued to gradually melt away in early 2011, although performance improved somewhat on Alt A mortgages. Combined, Fannie and Freddie had $447.33 billion in non-prime holdings at the end of the first quarter, down 17.3 percent from the same period in 2010, according to a new analysis by Inside Nonconforming Markets. Alt A mortgages accounted for 69.9 percent of the government-sponsored enterprises' exposure to non-prime loans. New business at the GSEs continued to meet high standards. The weighted-average loan-to-value ratio on mortgages guaranteed by... [Includes one data chart]

New due-diligence rules will likely result in increased costs for issuers of non-agency mortgage-backed securities and increased disclosures for investors. Due diligence firms are also divided on whether to assume the "expert liability" required by the Securities and Exchange Commission regarding due diligence performed on MBS. Vicki Beal, a senior vice president at Clayton Holdings, said Clayton – a leading MBS due diligence provider – would likely be willing to take on the expert liability requirements. However, she said Clayton’s assumption of the liability would require MBS issuers to pay more for Clayton's services. The SEC issued...

Industry participants warn that federal regulators' recently proposed definition for qualified residential mortgages is too stringent and will unnecessarily limit lending to prime jumbo borrowers. If the rule is adopted as proposed, many warn that issuance of non-agency mortgage-backed securities will be limited or non-existent. "While the rules do a good job of addressing and deterring abuses of subprime securitization structures, they are overly and unnecessarily harsh when applied to prime securitization structures," said Martin Hughes, president and CEO of Redwood Trust. Chris Flanagan, a managing director at Bank of America Merrill Lynch, added that...

High-touch servicer Nationstar Mortgage announced this week that it plans to raise up to $400.0 million via an initial public offering. The servicer - owned by Fortress Investment Group - primarily focuses on defaulted agency mortgages. Nationstar serviced a $64.2 billion portfolio as of the end of 2010, with subprime mortgages accounting for a 14.6 percent share. Reps. Gary Miller, R-CA and Brad Sherman, D-CA, recently introduced legislation to permanently increase the conforming loan limits. Few analysts believe that H.R. 1754, "the Preserving Equal Access to Mortgage Finance Programs Act," will gain much traction considering...

The mortgage broker industry saw a huge decline in new origination volume during the first quarter of 2011 as lenders appeared to focus on shoring up their retail channels in the face of a major slowdown in new lending volume. A new ranking and analysis by Inside Mortgage Finance reveals that the mortgage broker share of the market fell to a record low 7.1 percent during the first three months of 2011. Broker originations plummeted 59.6 percent from the fourth quarter to a record low of just $23 billion. In fact, the top three lenders in the market each generated more retail production than the entire broker channel did during... [Includes four data charts]

Can I afford this mortgage, and can I get a better deal somewhere else? Those are the two questions the Consumer Financial Protection Bureau wants borrowers to be able to answer when it is finished producing a new mortgage disclosure form that combines and would ultimately replace those required under the Truth in Lending Act and the Real Estate Settlement Procedures Act. This week, the CFPB released two alternate prototypes for industry and public review and comment, part of its Know Before You Owe project. The goal is to create a single, simpler form that makes the costs and risks of the loan clear and allows consumers to...

The Federal Deposit Insurance Corp. has sued two appraisal service providers for allegedly flawed appraisals on some 414 mortgage loans that caused millions of dollars in losses to the now-defunct Washington Mutual Bank. Separate complaints were filed May 9 in the U.S. District Court of Central California against CoreLogic, Inc. and LSI Appraisal, their parent companies and various affiliates for alleged gross negligence and multiple contract violations in connection with improper appraisals delivered to WaMu in 2006 through 2008. Out of the thousands of appraisals provided by the two companies to WaMu during the period, the FDIC claimed...

New legislation introduced in both the House and the Senate would impose tough national mortgage servicing standards, with plenty of sticks and barely a single carrot. Early last week, Sen. Jeff Merkley, D-OR, and Olympia Snowe, R-ME, introduced the Regulation of Mortgage Servicing Act to help homeowners stay in their homes by making the rules for mortgage servicers "more fair and transparent." The bill would require mortgage servicers to create a single point of contact for borrowers, end dual-track processing of foreclosures while homeowners are negotiating a modification, and provide an independent, third-party review before sending a family into...

All the witnesses at a hearing late last week in the Senate Banking Subcommittee on Housing, Transportation and Community Development agreed that national mortgage servicing standards are a necessity, but they acknowledged that the trick is deciding what they will cover and how they will work in an environment ridden with competing problems. "Servicers do not believe that the rules that apply to everyone else apply to them," said Diane Thompson, counsel at the National Consumer Law Center. "This lawless attitude, supported by financial incentives and too-often tolerated by regulators, is the root cause of the failure of...