Overall, banks continued to report strong earnings from their mortgage banking operations during the second quarter, but there were nearly as many institutions reporting declining profits or net losses as there were reporting gains. According to an analysis by Inside Mortgage Trends, an affiliated newsletter, a group of 21 top lenders posted a combined $8.2 billion in mortgage banking profits during the second quarter. That was down 6.8 percent from the $8.8 billion those same companies earning during the first three months of the year, but mortgage banking income was up dramatically from the first half of 2011. Major banks reported...

The non-agency MBS market could be headed toward its worst year ever for new issuance, and that’s saying something given its post-apocalyptic performance since 2007. New issuance of non-agency MBS totaled just $3.47 billion during the second quarter, a 31.2 percent drop from the first three months of the year, according to the Inside Mortgage Finance MBS Database. It wasn’t the slowest quarter ever, but it left the market at just $8.51 billion through the midway point in 2012, down 64.2 percent from last year’s level. Unless issuance picks up significantly in the second half of the year, 2012 will fall well short of the record low set in 2011. Although resecuritization activity picked up in the second quarter, posting a 30.7 percent gain from the first three months of the year, year-to-date issuance of these deals was down...[Includes three charts]

The American Securitization Forum opposes the notion of revising the federal bankruptcy code to enable overburdened student loan borrowers to lighten their debt loads, one of the suggestions in a new report on the state of private student loans that was released by the Consumer Financial Protection Bureau and the U.S. Department of Education. “The ASF continues to support strong underwriting standards and fully transparent disclosure to borrowers. At the same time, the ASF opposes reopening the bankruptcy code to allow borrowers to reduce or eliminate their student loan debt,” said ASF Executive Director Tom Deutsch. “Such action would eliminate educational opportunities for a broad swath of borrowers, as lenders would be less willing to offer loans, thereby curtailing credit availability.” Currently, consumers generally cannot discharge...

California’s San Bernardino County Board of Supervisors has yet to decide if it wants to go ahead with a controversial proposal to seize performing underwater non-agency mortgages via eminent domain, repackage them and sell them to new investors. But just the fact they’re considering it has compelled some secondary mortgage market representatives to call in the big guns of the federal government to squash the notion. Late last week, Securities Industry and Financial Markets Association President and CEO Tim Ryan wrote to Treasury Secretary Tim Geithner, Federal Reserve Chairman Ben Bernanke, and Department of Housing and Urban Development Secretary Shaun Donovan to raise his membership’s concerns about the proposal and called on them to oppose it. “We believe that efforts by municipalities to employ the power of eminent domain to seize mortgage loans are...

The investor group that had been seen as the most formidable opponent to Bank of America’s proposed $8.5 billion MBS settlement pulled out of the fight this week. Walnut Place submitted a motion to New York State Supreme Court Judge Barbara Kapnick, which she granted, to formally withdraw its objection to the BofA settlement. “Walnut Place respectfully requests that it be permitted to withdraw as an intervenor in this proceeding,” the investor group wrote to the judge. Walnut Place, which represents...

Faced with a deadline it was unable to meet, the Securities and Exchange Commission this week published interpretive guidance regarding references in federal regulations to MBS ratings. The Dodd-Frank Act mandated that such references be changed by July 20, but the SEC’s guidance will keep the references intact until the agency and others can establish new standards of creditworthiness. The DFA strikes references to credit ratings from nationally recognized statistical rating organizations in federal regulations and inserts new text that provides that in order to satisfy these definitions a security must meet standards of credit-worthiness established by the SEC. The SEC said it was unable...

Moody’s Investors Service proposed a significant overhaul to ratings for non-agency MBS servicers late last week. Among other new metrics, the rating service is planning to incorporate performance data from mortgages serviced for the government-sponsored enterprises. Currently, servicers submit loan-level portfolio data to Moody’s as part of the rating service’s “servicer quality assessments.” The data would be augmented with data from securitization trusts, which is available more quickly, as well as GSE performance data “as needed.” Data from securitization trusts will receive...

There appear to be no immediate plans to move the GSEs beyond conservatorship status but news this week that the Federal Housing Finance Agency is actively investigating the possibilities of receivership may be designed to attract the attention of thus far indifferent policymakers and snap official Washington into action, say industry experts. The FHFA this week confirmed that it has commissioned the consulting firm PricewaterhouseCoopers to create contingency plans for taking Fannie Mae, Freddie Mac and the Federal Home Loan Banks into receivership. A Finance Agency spokesman said the hiring of PwC, which was not officially announced, is just one of a number of “ordinary regulatory activities” that the FHFA is authorized and obligated to pursue under the authority granted the agency by the Housing and Economic Recovery Act of 2008.

The Federal Home Loan Bank system is one of three potential hosts for a proposed new refinance program unveiled this week by a Senate Democrat aimed at rescuing underwater homeowners without direct federal assistance. Oregon Sen. Jeff Merkley’s proposal – spelled out in a white paper titled “The 4% Mortgage: Rebuilding American Homeownership” – would create a temporary government-backed trust to purchase eligible mortgages issued by private lenders. The RAH Trust would be funded by the federal government’s sale of bonds to investors. The plan would allow underwater borrowers who are current on their mortgages to refinance at a lower interest rate.

A bill introduced in the House earlier this month would allow privately-insured credit unions access to the Federal Home Loan Bank system for the first time. H.R. 6105, introduced by Rep. Steve Stivers, R-OH, would amend the Federal Home Loan Bank Act to allow non-federally-insured credit unions to become members of one of the 12 FHLBanks. Currently, only federally insured credit unions can access the FHLBanks’ low-cost, secured funds, and certain requirements must be met.