During the height of the housing boom, “80-10-10” loan structures became very popular and caused headaches for mortgage insurance firms that lost business to these arrangements, which dodged the need for traditional MI coverage. As the mortgage and housing markets continued on a downward spiral, a new variant emerged that allowed borrowers to take out a conforming first mortgage for 80 percent of the house value and finance the rest with a 20 percent home equity loan. Both versions went the way of the dinosaur ...
It shouldn’t be a surprise if mortgage lenders are suffering from loan originator compensation regulation fatigue. “The industry has been in a constant state of implementation regarding LO comp and LO qualification since 2009,” said Amy Thoreson Long, senior counsel in the consumer lending division of Wells Fargo’s law department, during a webinar hosted yesterday by Inside Mortgage Finance, an affiliated newsletter. The bad news is, things will get much worse in that regard before they get better, thanks to ...
Officials at Redwood Trust took pains last week to defend differences in the real estate investment trust’s business model compared with other REITs that focus on investing in mortgage-backed securities. Some investors have been critical of low dividend payments from Redwood, but the REIT said its dividend payments are not directly comparable to other REITs. “Analysts and investors puzzle about how to categorize Redwood and how to value our company,” Martin Hughes and Brett Nicholas ...
Just when you thought the debate over fair value and historical amortized cost has faded into the sunset, along comes a new empirical study that reinforces the view that fair-value calculations are a better predictor of bank failure. Published by the American Accounting Association, the study suggests that leverage based on fair value provides the earliest signal of financial trouble – at least two to three years prior to failure compared to other measurements. This finding is consistent with ...
Wells Fargo last year wound up keeping almost $20 billion of new residential production its books instead of selling the loans to Fannie Mare and Freddie Mac.
Conventional conforming mortgage originations – mostly financed by Fannie Mae and Freddie Mac – accounted for a record 66.8 percent of total single-family lending last year, according to a new market analysis and ranking by Inside Mortgage Finance. Mortgage lenders originated a whopping $1.273 trillion in conventional conforming mortgages in 2012, the highest level since the all-time record of $2.460 trillion was set back in 2003. Volume in the sector started strong and kept building throughout the year, including a 19.1 percent jump from the third to the fourth quarter. For the year, conventional conforming originations were...[Includes two data charts]
A new mortgage reform proposal drafted by a blue-ribbon panel gives a fairly prominent role to private credit enhancement as a key feature in a new mortgage securitization system. While the plan released this week by the Bipartisan Policy Center’s Housing Commission – like all others that came before it – calls for a smaller government role in the mortgage sector, it remains to be seen whether it will get the reform process off the ground in a stalled political environment. The commission, comprised of former lawmakers and cabinet officials, both Republican and Democrat, calls for phasing out the government-sponsored enterprises in favor of a new federal entity that explicitly acts as a backstop of last resort after the private sector. It would replace Fannie Mae and Freddie Mac over a five- to 10-year period with a new “Public Guarantor,” a wholly government entity that would provide an explicit, but limited guaranty on mortgage-backed securities. “The government would cover...
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