Two of the three biggest barriers to a return of the non-agency mortgage sector – the premium capture cash reserve account and the qualified mortgage definition – are embedded in the Dodd-Frank Act, industry officials say. And the third is what’s not in the controversial law: any substantive reform of Fannie Mae and Freddie Mac. The biggest challenge to reducing the government’s domination of the mortgage market is the lack of direction on the government-sponsored enterprises, said Tom Deutsch, executive director of the American Securitization Forum, during a hearing this week.

A surge in securitization of home purchase-money mortgages during the second quarter was not enough to offset a sizable drop in refinance activity during the first three months of the year, according to a new Inside MBS & ABS analysis and ranking. A total of $372.85 billion of agency single-family MBS was issued during the second quarter, down 3.1 percent from the first three months of 2012. Although securitization of purchase mortgages rose 22.4 percent, partly from seasonal factors as well as firming in the housing market, the volume of refinance loans securitized by Fannie Mae, Freddie Mac and Ginnie Mae declined 10.6 percent.Includes two data charts.

Fitch Ratings released revised non-agency MBS surveillance criteria, but most of the changes had been implemented earlier and the updated procedures for reviewing credit ratings are not expected to have a material impact on existing deals. The rating service did note that it is in the process of developing a new nonprime MBS loan loss model that likely will have a negative impact on current ratings. The new nonprime model incorporates a new regression analysis and more conservative rating stress scenarios, Fitch said. The updated surveillance criteria include an updated model for prime MBS that was released in August 2011.

Mortgage securities investors have as much at risk as lenders from the emerging ability-to-repay consumer protection standard because borrowers will be able to challenge compliance with far fewer time restrictions, according to the American Securitization Forum. In a comment letter to the Consumer Financial Protection Bureau, the ASF urged the agency to set objective and clear standards for qualified mortgages – which will satisfy the ability-to-repay underwriting requirement imposed by the Dodd-Frank Act – and a legal safe harbor. “Otherwise, the resulting significant risk and costs of potential litigation will constrain investors from purchasing...

A federal judge in New York has given the go-ahead for a group of investors in an IndyMac Bank MBS offering to proceed as a class in a suit against Credit Suisse, the offering’s underwriter. The June 29 ruling by U.S. District Judge Lewis Kaplan granted a December 2010 request for class certification to investors as they allege Credit Suisse misled them about the quality of toxic loans underlying a $642 million MBS offering in 2006. The plaintiffs claim in their suit that the sale of the MBS, Residential Asset Securitization Trust 2006-A8, sponsored by IndyMac Bank, violated the Securities Act of 1933 because the offering falsely represented that the underlying mortgage loans were originated in accordance with IndyMac’s underwriting standards.

Moody’s Investors Service is warning that the booming market for subprime auto ABS is poised to potentially overheat as growing demand could push lenders to loosen underwriting standards to boost volume, repeating what occurred during the 1990s. A recent Moody’s report cites emerging parallels between the U.S. subprime auto lending mar-ket today and the early 1990s when investor capital flocked into the sector by charging high loan rates while enjoying low funding costs. When the ‘90s lending boom went bust, net losses in subprime auto ABS jumped from under 3 percent in early 1995 to over 10 percent in 1997, according to Moody’s.

There is little to no chance of GSE reform bills moving any further in Congress during the remainder of the legislative year, say industry insiders who warn that the political priority for next year’s Congress will shift from restructuring Fannie Mae and Freddie Mac to scaling back the massive Dodd-Frank Act. For all the sound and fury surrounding Republican-led filing of 25 separate pieces of GSE legislation in the House and Senate during the 112th Congress, nearly all the bills, including six proposals considered “comprehensive” GSE reform, remain bottled up in committee.

Early indicators suggest that mortgage production volume was up slightly in the second quarter of 2012, and lenders continued to book strong net profits as a result of healthy gain-on-sale margins.Industry economists had generally expected a slowdown in loan production levels during the second quarter. The consensus forecast from economists at Fannie Mae, Freddie Mac and the Mortgage Bankers Association pointed to a 4.6 percent decline in new originations during the second quarter.Despite the fact that mortgage interest rates continued to ...

There isn’t a lot of doubt about the increasingly top-heavy nature of the mortgage business, but industry experts are divided over the role government policy has played and its impact down the road as Dodd-Frank Act reforms take root. A decade ago, in 2001, the top five lenders in the market accounted for 37.6 percent of total originations and 36.6 percent of mortgage servicing. By the end of last year, the top five lenders had a combined market share of 59.1 percent in originations and 55.2 percent in mortgage servicing.That trend could be exacerbated by the increased compliance ...

The sooner the Federal Housing Finance Agency acts to clarify Fannie Mae’s and Freddie Mac’s positions on what triggers a loan repurchase request, the better it will be for lenders and for the recovery of the housing finance system, industry groups say. Over the past three years, the two GSEs have asked for more than $80 billion in flawed loan repurchases from lenders, prompting an overabundance of underwriting caution, according to Fitch Ratings. “Reduced uncertainty around the reasons as well as the timing and remedies available for repurchase may help ease lenders’ concerns and improve credit availability,” said Fitch. “Establishing clear and detailed repurchase standards, developing reporting and enforcement mechanisms and creating clear timelines that govern the process would be positive steps and would be welcome by lenders and investors alike.”