A task force of state insurance regulators has agreed to require insurers to set aside additional capital to cover risks tied to residential and commercial MBS in an effort to buffer the industry from losses in the event of a severe downturn. The National Association of Insurance Commissioners’ Valuation of Securities Task Force voted 11-2 to support a proposed increase in the NAIC’s capital requirements for U.S. life insurers. The change in capital requirements is driven by year-end NAIC modeling assumptions related to RMBS and CMBS. The change raises...

Redwood Trust late last week reported net income of $40.0 million for the third quarter of 2012, including $3.0 million in net gains on the $372.0 million of non-agency MBS issuance and whole loan sales the real estate investment trust completed during the period. Redwood officials said the company is well-positioned for growth in non-agency MBS issuance, commercial MBS issuance and soon agency origination activity. In a quarterly review, company officials noted that some have called the REIT “crazy” for resuming issuance of non-agency MBS after the financial crisis of 2007. Redwood has issued eight non-agency MBS since April 2010 totaling $2.6 billion. The REIT said...

Fannie Mae and Freddie Mac continued to trim their retained holdings of MBS and unsecuritized mortgages during the third quarter, but at a slower pace than in previous periods, according to an analysis by Inside MBS & ABS of earnings reports released this week by the two government-sponsored enterprises. One of the conditions of the conservatorships the GSEs entered four years ago was that they would reduce their retained mortgage portfolios by 10 percent a year. Those terms were revised in August to include a 15 percent annual wind-down, which would take each GSE’s investment portfolio down to $250 billion by the beginning of 2018, four years sooner than under the previous arrangement. As Freddie noted...[Includes one data chart]

Delinquencies on non-agency MBS will likely increase temporarily due to Hurricane Sandy, according to industry analysts, but long-term losses due to the storm are expected to be minimal. Insurance will play a key factor in overall losses, and estimates vary significantly on the extent of coverage in the affected areas. Moody’s Investors Service projected this week that non-agency MBS are unlikely to suffer material losses due to Sandy even though the affiliated Moody’s Analytics estimated the damage to residential housing from the storm will hit $10.5 billion. “Even if damages exceed...

The United States just concluded an electoral campaign season that involved the expenditure of billions of dollars and resulted in no change in the balance of power on the federal level, beyond strengthening Democrats’ control in the U.S. Senate. But that doesn’t mean nothing important is going to happen over the next four years. Securitization industry officials, Washington insiders, political observers and policy wonks all expect hard financial realities to compel policymakers into responding to a host of issues that will significantly affect housing finance and securitization. “We don’t think the ‘status-quo election,’ as some have called it, means status quo for residential mortgage finance,” said Karen Shaw Petrou, a managing partner at Federal Financial Analytics, a Washington, DC, think tank. She thinks...

MGIC Investment Corp. announced last week it has reached a tentative agreement with Freddie Mac “on substantially all terms of a settlement” of a simmering and prolonged dispute over pool insurance between the mortgage insurer and the government-sponsored enterprise. If MGIC and Freddie are able to agree on matters “significant to final resolution” involving payments to be made to the GSE, it would resolve a coverage dispute that threatened to prevent the MI from backing some loans. “The principal economic terms concerning the amount of payments in settlement of MGIC’s obligations under the policies at issue have been...

The Consumer Financial Protection Bureau has found “significant non-compliance” during its examinations of mortgage lenders, compelling them to take a variety of steps deemed necessary to be brought into compliance, according to the CFPB’s first report on its examination findings. Violations under the Real Estate Settlement Procedures Act included failures to make proper and complete disclosures to consumers of costs and other terms because of errors in the good faith estimate and HUD-1 settlement statement, the CFPB stated. Truth in Lending Act violations included...

Mortgage market watchers should expect “business as usual” from a second Obama administration as the White House and Congressional Democrats are poised to preserve gains under the Dodd-Frank Act, including the Consumer Financial Protection Bureau. Both parties say they want to resolve the conservatorships of the government-sponsored enterprises, but experts say the necessity of addressing budget and tax issues will trump all other considerations next year. “Clearly a second term for the Obama administration would be business as usual as best they can,” explained Timothy McTaggart, partner at the Pepper Hamilton law firm during a pre-election webinar. “I don’t think Dodd-Frank will remain sacrosanct for all time. I think during a second term the [regulatory] agencies will get past the point of having to put the rules out, they will get some feedback and they will start making it known where they see gaps or deficiencies.” Karen Shaw Petrou, managing partner of Federal Financial Analytics, said...

In the past four years, Ocwen Financial has gone from the 24th-largest residential mortgage servicer with a declining portfolio of distressed mortgages to, on paper, the fifth largest servicer with a portfolio increasing in volume and product type. The growth of the nonbank has involved unique tactics, including a reliance on offshore employees and tax structures. Ocwen handled a $121.8 billion portfolio as of the end of the third quarter, including subservicing, but pending acquisitions of servicing from Residential Capital and Homeward Residential, will push that to $361.7 billion. And Ocwen is...

Three nonbank mortgage servicers moved to strengthen their positions in the market, but several of the top banks in the industry also showed no sign of backing off, according to the latest ranking by Inside Mortgage Finance. While a number of analysts have predicted that banks would flee from the servicing business because of rising operational costs, increased compliance scrutiny and proposed increases in capital requirements, Wells Fargo continued to grow its business. The company reported a total of $1.879 trillion in servicing as of the end of September, up 0.9 percent from the previous quarter. After absorbing Wachovia’s mortgage operations in the third quarter of 2008, Wells relied...[Includes one data chart]