The streamlined short sale programs announced last week by Fannie Mae and Freddie Mac could increase losses on bank holdings of second liens, according to industry analysts. The changes, directed by the Federal Housing Finance Agency, include the ability for the government-sponsored enterprises to offer up to $6,000 to second-lien holders to expedite a short sale. “Previously, second-lien holders could slow down the short sale process by negotiating for higher amounts,” the FHFA said. Overall ...

The rating services report increasing inquiries regarding potential ratings for securitization of income from real-estate owned rental properties. The first REO rental non-agency mortgage-backed security could be issued later this year, but Suzanne Mistretta, a senior director at Fitch Ratings, suggested that AAA ratings are unlikely initially. “The lack of historical data and ambitious growth strategies by regional operators will make high investment-grade ratings on these transactions difficult ...

Ocwen Financial announced last week that its executive chairman has relocated to the U.S. Virgin Islands as part of the company’s efforts to reduce its tax rate. William Erbey, the executive chairman of Ocwen, said the company worked for nearly three years on the tax maneuver, which will reduce Ocwen’s effective tax rate by more than half. The strategy included the establishment of a new corporation, Ocwen Mortgage Servicing, in February. The wholly owned subsidiary of Ocwen was formed under the laws of ...

The Consumer Financial Protection Bureau’s recent proposed rule regarding loan originator compensation would expand and clarify anti-steering rules established by the Federal Reserve, in effect since April 2011. “Compensation structures frequently gave loan originators incentives to steer consumers into loans with higher rates or other unfavorable terms,” according to the CFPB. The regulator’s proposed rule cited a consent order issued by the Fed in 2011 regarding subprime steering by Wells Fargo ...

M&T Bank announced this week that it will acquire Hudson City Bancorp for $3.7 billion. The jumbo lender will merge into a subsidiary of M&T. Hudson City was the 10th-ranked non-agency jumbo lender in 2011, according to Inside Nonconforming Markets, with an estimated $3.15 billion in such originations. Officials at M&T said they acquired Hudson – which was having difficulties funding its jumbo originations – to expand M&T’s retail branch network. Officials at Hudson City said M&T will help expand ... [Includes five briefs]

The Treasury Department’s surprise announcement late last week that it will now “sweep” up any and all future profits from Fannie Mae and Freddie Mac in lieu of the dividends the GSEs had been paying in return for taxpayer support solves some problems but creates new ones, industry observers say. Rather than continue to borrow from the Treasury to make dividend payments to the Treasury – as the GSEs have since they were placed in conservatorship in September 2008 – the revised preferred stock purchase agreements will replace the 10 percent quarterly dividend with a “full income sweep” of “every dollar of profit that each firm earns going forward,” according to Michael Stegman, counselor to the Treasury for Housing Finance Policy.

The Federal Housing Finance Agency this week announced that Fannie Mae and Freddie Mac will implement new short sale guidelines that expand eligibility criteria, as well as align and consolidate existing GSE short sales programs into one standard offering. The new guidelines, which go into effect Nov. 1, will permit homeowners with a Fannie or Freddie mortgage to sell their home in a short sale even if they are current on their mortgage, provided they have an eligible hardship.

Fannie Mae announced last week that it is amending its guidance regarding custodial bank accounts, effective immediately. Prior to the company’s Aug. 15 servicing guide announcement, tax and insurance escrow funds for Fannie mortgage loans with all remittance types could be commingled in the same custodial account, although the servicer could establish separate accounts for T&I payments for each remittance type if it chose to do so.

Fannie Mae and Freddie Mac’s newly amended preferred stock purchase agreement with the U.S. Treasury requiring the companies to accelerate the rate at which they reduce their investment portfolios will have little immediate impact but will become more challenging to the GSEs as time goes on, analysts predict. The Treasury’s amended agreement calls for the GSE portfolios to be wound down at an annual rate of 15 percent, instead of the 10 percent annual reduction originally required of the two companies. The more aggressive 15 percent reductions will go into effect in 2013. Consequently, Fannie’s and Freddie’s portfolios must be reduced to the $250 billion target by 2018, four years earlier than initially scheduled.