The U.S. residential MBS sector will continue its slow, steady recovery in 2016 amid a host of challenges, showing further improvement in housing fundamentals, credit quality and mortgage performance, according to analysts. The challenges to MBS structured financing boil down to the following: tapering of Federal Reserve investment in MBS, MBS supply and demand, interest rates and prepayment risk. Fitch Ratings notes...

Initial industry reaction to the rate hike was muted. Late this week, mortgage rates hardly budged...

The legacy of the housing bust continues to play out in the enforcement arena. Last week, the National Credit Union Administration announced a $225 million settlement with Morgan Stanley, bringing to a close litigation stemming from the purchase of allegedly faulty residential MBS by four corporate credit unions that ultimately failed. The settlement addresses claims brought in 2013 by the NCUA on behalf of U.S. Central Federal Credit Union, Western Corporate FCU, Members United Corporate FCU and Southwest Corporate FCU. As a result of the settlement, the NCUA will dismiss pending suits against Morgan Stanley in federal district courts in New York and Kansas. The firm did not admit...

The Basel Committee on Banking Supervision issued a revised proposed standardized approach for gauging credit risk, making adjustments suggested by industry participants. Among the revisions was the allowance for certain banks to use external credit ratings as part of determining capital requirements for credit risk. While regulators in various countries appear likely to adopt the proposed use of credit ratings, U.S. banking regulators wouldn’t be able to due to provisions in the Dodd-Frank Act. Anticipating the divergence among regulators, the BCBS noted that banks would classify exposures into three different buckets, provided that certain minimum criteria are met. U.S. banking regulators noted...

Rod Alba of ABA offered up this sobering thought: for violating the TRID rule, lenders could be fined up to $5,000 per violation, per day.

Income from mortgage production-related activities fell sharply during the third quarter of 2015, according to a new Inside Mortgage Trends analysis of earnings reports from 13 major companies. And results from mortgage servicing operations were even worse. The 13 lenders reported a combined $1.623 billion in production-related income for the third quarter, a decline of 23.9 percent from the previous period. While all but two of the lenders managed to ... [Includes one data chart]

Mortgage bankers reported a sharp decline in profitability during the third quarter of 2015, including a bottom-line loss on servicing activity, according to the Mortgage Bankers Association’s quarterly performance report. The average firm’s pretax income was $1.70 million for the third quarter, the MBA said, down 51.4 percent from the previous three-month period. For the year, however, average firm pretax income was up 19.1 percent from the first nine months of 2014 ...

The Federal Housing Finance Agency gave Fannie Mac and Freddie Mac their marching orders for 2016 by releasing its annual objectives late this week. Increasing access to credit, more risk sharing and continued work on building a new single security are among the primary goals for the year.As credit risk transfers continue to evolve, the FHFA said the GSEs should be transferring credit risk on a minimum of 90 percent of the unpaid principal balance of newly acquired single-family mortgages in loan categories targeted for risk transfer. For 2016, those targets include non-Home Affordable Refinance Programs, fixed-rate terms greater than 20 years, and loan-to-value ratios above 60 percent.

More than two months into the Consumer Financial Protection Bureau’s integrated disclosure rule, known as TRID, many lenders apparently are still at the mercy of their technology vendors to get fully and finally up to speed. “Our members report that problems and glitches are still prevalent everywhere,” said Rodrigo Alba, senior regulatory counsel at the American Bankers Association, during a webinar this week sponsored by Inside Mortgage Finance, an affiliated publication ...

A new Inside The GSEs analysis reveals that seller repurchases of Fannie Mae and Freddie Mac mortgages fell to an all-time low during the third quarter as the industry continued to move beyond the havoc caused by pre-crash lending excess. Fannie and Freddie reported combined repurchases or other indemnification related to $434.2 million of home loans backing their mortgage-backed securities during the third quarter. That was down just 0.5 percent from the second quarter, but it was the lowest total since the GSEs began filing repurchase disclosures with the Securities and Exchange Commission back in early 2012. The GSEs also reported all-time lows in their inventory of pending and disputed buyback...