The third and latest round of quantitative easing rolled out earlier this month by the Federal Reserve will sweeten MBS demand far above supply, but it will ultimately provide only a negligible boost to mortgage refinance activity, analysts say. The Federal Open Market Committee announced QE3 on Sept. 13, making a commitment to buy an additional $40 billion in agency MBS a month and saying that it would continue buying “if the outlook for the labor market does not improve substantially.” The New York Fed has been buying about $27.9 billion of agency MBS per month since October 2011 in an effort to reinvest principal payments from its MBS holdings back into the mortgage securities market. An analysis by Bank of America Merrill Lynch this week found...

A presidential task force created to investigate the pooling, sale and securitization of residential mortgages is now ready to pursue action against those whose business practices contributed to the financial crisis, according to New York Attorney General Eric Schneiderman. Certain financial institutions have contacted outside counsel after Schneiderman, chairman of the Residential MBS Working Group, told reporters the group is ready to take legal action “sooner rather than later.” A spokesman for the New York AG’s office declined to provide details but confirmed that there are ongoing investigations and that there would be upcoming announcements. “We are looking at conduct that led...

It looks like the controversial risk-retention proposal won’t be issued by federal regulators until sometime next year, as major components of the Dodd-Frank Act remain in limbo. “I think much of the Dodd-Frank regulatory process is on hold until after the elections, and we’re unlikely to see decisions on most major issues until sometime in 2013,” said Steven Abrahams, an analyst at Deutsche Bank Securities. “The only process that seems to be rolling is the one run by the Consumer Financial Protection Bureau to define mortgage origination and servicing standards.” As he sees it, “the first half of next year will probably see...

Researchers with the Federal Reserve Bank of New York have found additional evidence to support New York Fed President William Dudley’s call for an increase in streamlined refinances for current borrowers with agency mortgages. They suggest that further changes to the Home Affordable Refinance Program to prompt refis and prepayments are not a “zero sum game” between borrowers and agency MBS investors. In January, Dudley said obstacles have prevented...

First-lien mortgages held in bank and thrift portfolios increased by 4.1 percent at the end of the second quarter of 2012 compared with the same period in 2011, according to an Inside Nonconforming Markets analysis of bank call report data. The strong increase comes as banks actively sell poorly performing legacy mortgages and suggests that lenders have increased their non-agency portfolio originations. Of the 21 banks and thrifts with at least $10.0 billion in first-lien holdings as of the ... [Includes one data chart]

Special servicers are set to receive more than $300.0 billion in distressed agency mortgages, according to industry analysts. The projections come after positive reviews of Fannie Mae’s controversial purchase and transfer of $73.0 billion in mortgage servicing rights from Bank of America in 2011. The Federal Housing Finance Agency and the FHFA Office of Inspector General each determined that Fannie paid a premium for BofA’s mortgage servicing rights, but significant savings will be recognized due ...

Wells Fargo and Morgan Stanley last week received notices from non-agency mortgage-backed security investors represented by the law firm of Gibbs & Bruns, which helped negotiate the pending $8.5 billion non-agency MBS settlement with Bank of America. Industry analysts suggest that the notices of non-performance could prompt settlements from Wells and Morgan Stanley, though the circumstances differ from the BofA case. The notices identify covenants in pooling and servicing agreements that the servicers ...

Lenders warn that the Consumer Financial Protection Bureau’s proposed changes to stringent rules for “high-cost” mortgages will dramatically restrict credit availability for borrowers. Consumer advocates counter that the CFPB’s proposal to expand coverage of the Home Ownership and Equity Protection Act is appropriate and they are concerned with potential evasion of the pending rule. “The high-cost proposal would inevitably result in the further tightening of credit, even for creditworthy applicants,” ...

The market share for higher priced mortgages doubled in 2011 compared with the previous year, according to an Inside Nonconforming Markets analysis of Home Mortgage Disclosure Act data released last week. However, the market share for the proxy for subprime mortgages used by federal regulators remained tiny at 1.2 percent of the dollar volume of originations reported in 2011. Some $12.38 billion in higher priced mortgages were sold in 2011, up ... [Includes one data chart]

Thomas Hoenig, a director at the Federal Deposit Insurance Corp., last week called for changes to impending Basel III capital standards. Industry analysts have warned that the rules will discourage origination of nontraditional mortgages. “In private discussions I find a good deal of uneasiness about Basel III’s ability to be more effective than previous Basel efforts; however, there is a sense that we cannot go back,” Hoenig said in a speech. “I suggest that we not only can go back, we must.” ...