There were nationwide protests this week to stop Fannie Mae and Freddie Mac from selling the bulk of its nonperforming loans to private-equity firms and hedge funds. Politicians and community groups continue to argue that the GSEs should level the playing field so more nonprofit groups have a chance to buy the loans. “Struggling mortgages should go to non-profits that fight foreclosures and create affordable housing, not Wall Street speculators ready to evict struggling families. Our neighborhoods are not for sale,” tweeted one of the protest’s organizers, the American Alliance for Californians Empowerment. The protestors argued that Fannie and Freddie continue to announce sales this year where Wall Street firms are the primary benefactors.

The case of Fairholme Fund v. The United States will continue to linger in the courts as the battle for getting the government to release the bulk of the documents pertaining to the preferred stock purchase agreements between the Federal Housing Finance Agency and the Treasury plays out with a motion filed this week. “We are now in a struggle with the defendants, both the Department of Treasury and FHFA, over claims of the deliberative process privilege they sought to keep from having to produce thousands and thousands of documents, even in redacted form,” Charles Cooper, attorney with Cooper & Kirk, the law firm representing the shareholder plaintiffs, told Inside The GSEs.

The Federal Housing Finance Agency’s long-awaited final piece to the representation-and- warranties framework is complete with the addition of an independent dispute-resolution process that serves as a last resort for disputed loans. A neutral third-party arbitrator will determine whether there was a violation in loan eligibility in the loans sold to Fannie Mae and Freddie Mac. Talks of an alternative to solving the most difficult repurchase demands, outside of the standard procedures, began in 2014. The FHFA reiterated its point that the IDR process only comes into play after the appeal and escalation processes have been exhausted. The GSEs have said most lenders should be able to work with them to resolve buyback requests.

Fannie Mae and Freddie Mac issued $56.56 billion of single-family mortgage-backed securities in January, a modest 5.6 percent decline from the previous month, according to a new Inside The GSEs ranking and analysis. December, however, may have been an anomaly. Many mortgage originators reported delays in loan closings in October as the primary market adopted a significant change in mortgage disclosures and closing requirements under the so-called TRID rule. Those delays, ranging from a few days to a week or more, pushed some October closings into November. Given the normal lag between primary market origination and securitization – especially for correspondent originations – the TRID traffic jam may have accounted for the sharp...

Paul Hindman, a consultant at Grid Financial Services, had this to stay about the deal: “The more important question is what other mortgage-related companies are on Computershare’s shopping list….”

A federal appeals court in Denver unanimously affirmed a lower court ruling that a claim of damage related to an originator/seller’s misrepresentation accrues when the loan is sold. Ruling in six cases involving plaintiffs Lehman Brothers Holdings and Aurora Commercial Corp. versus Universal American Mortgage Co. and Standard Pacific Mortgage, the Tenth Circuit Court of Appeals rejected plaintiffs’ contentions that their claims were really “indemnification” claims that did not accrue until they bought the loans from Fannie Mae and Freddie Mac. The overarching issue in this complicated case is...

The expected increase in interest rates on some previously modified home mortgages is a slight credit negative for RMBS performance because these loans will re-default at a higher rate, according to analysts at Moody’s Investors Service. However, higher default rates will have only a modest effect on subprime and Alt A RMBS, because only a small percentage of outstanding subprime and Alt A mortgage loans are positioned to experience future rate step-ups. In their research, the analysts found that subprime and Alt A modified loans become delinquent more frequently after a rate step-up. “Modified subprime and Alt A loans with a demonstrated performance history of four to five years become delinquent at a significantly higher rate after a step-up in interest rates than do loans of a similar type and vintage that have not stepped up,” said the analysts in a new report released this week. According to their data, in July 2015, only 2 percent of the modified re-performing subprime loans became...

Cash-out refinances are staging a quiet comeback as rising home-price appreciation makes such deals feasible for more homeowners. The number of cash-out refinances continued to reach new recent highs in the third quarter of 2015, rivaling numbers not seen since 2008. Black Knight Financial said close to 300,000 cash-out refinances were originated in the third quarter of last year, and about one-million over the past 12 months. During that same time period, 42 percent of all first-lien refinances had a cash-out component, the highest share since 2008. In addition, the average cash-out amount was the most it’s been since 2007 at more than $60,000. In all, these homeowners tapped...

Securities backed by nonperforming mortgages, one of the biggest sources of volume currently in the non-agency MBS market, are expected to continue to look good for investors and issuers, even as the housing market recovers. This week, analysts at Bank of America Merrill Lynch recommended investing in senior tranches of non-agency MBS backed by nonperforming loans. “As things get bad for risk assets and we recommend positioning for further widening in risk premium, NPL senior tranches stand out...

The outlook for publicly traded real estate investment trusts that invest in agency MBS and related products is starting to improve, in part, because competing investments are looking ugly. That might seem like a small consolation prize for REITs, but several are posting decent earnings, even though the book value of their common stock is relatively weak. Meanwhile, while certain investors shun their stocks, many companies have engaged...