Fannie Mae, Freddie Mac and their federal conservator are trying to devise a new servicing compensation scheme without upsetting the to-be-announced agency MBS market that Wall Street dealers and Main Street mortgage lenders depend on. In a recent white paper outlining two alternatives for reforming servicing compensation so that more resources are available for distressed loans, the Federal Housing Finance Agency said “promoting continued liquidity” in the TBA market is one of its primary objectives. The agency also mused that a new servicer compensation system for the government-sponsored enterprises could...

With the non-agency MBS sector still languishing, it’s time to put the approximately $6.3 billion in unused purchasing power at the Public-Private Investment Program to use in a revamped iteration, according to analysts at Deutsche Bank. “The Public-Private Investment Program has been having a tough time in 2011 despite a remarkable initial success in facilitating price discovery and supporting market functioning in the residential MBS market,” said two Deutsche Bank analysts in a recent report. They note that all eight of the Public-Private Investment Funds suffered a declining internal...

Credit rating agencies appear to be more generous in rating structured finance products over other bond types because they tend to bring in more revenue, according to a recent study by academics. Researchers at Indiana University, American University and Rice University said that, contrary to assertions by the top credit rating agencies, asset classes are not equal when it comes to ratings. The study “Credit Ratings Across Asset Classes: A=A?” claims there is overwhelming evidence that structured products, such as MBS, receive significantly higher, more optimistic ratings than those assigned to bonds issued by...

Redwood Trust took a loss on the $375.2 million jumbo mortgage-backed security it issued at the end of September, officials at the real estate investment trust revealed this week. However, the company plans to issue another jumbo MBS within the next few months and anticipates turning a profit on its non-agency activity in the long-term. ...

Ocwen Financial’s pending purchase of subprime servicer Saxon Mortgage is just the latest growth spurt for the firm. “We are looking at other transactions as we speak,” William Erbey, chairman of Ocwen, said last week on a call with investors. Even with the Saxon deal, Erbey said Ocwen’s pipeline of potential acquisitions increased in the third quarter of 2011 compared with the previous quarter, to more than $300.0 billion in unpaid principal balance. ...

Prospects for a return of elevated conforming loan limits remain unclear after the Senate approved a reinstatement provision in an appropriations bill in October. Most conservatives in the House remain strongly opposed to the reinstatement – which would likely delay the return of the non-agency market. More than 30 percent of members of the House support a temporary reinstatement of elevated conforming loan limits, according to a letter sent to House leaders this week. ...

The stellar returns on non-agency mortgage-backed securities purchased via the Public-Private Investment Program have faltered this year, prompting some to call for a revamp of the program. Invesco – the fund that has seen the most success with the PPIP – also recently announced that it quit the program after having difficulties finding appropriate investments. ... [includes one data chart]

A new regulatory regime for non-agency securitization proposed last week by Rep. Scott Garrett, R-NJ, has attracted some support from non-agency mortgage-backed security issuers. However, the Private Mortgage Market Investment Act, which is aimed at reviving the non-agency market, also faces some bipartisan opposition. “This legislation, along with regulatory plans to ‘level the playing field,’ could spur a broad resurgence of the private MBS market in the short-term, for the benefit of homeowners, lenders, and investors,” said Martin Hughes, president and CEO of Redwood Trust, at a hearing this week by the House Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises. ...

The 14 servicers operating under consent orders with federal regulators started their independent foreclosure review programs this week. The consent orders and Home Affordable Modification Program guidelines each contained single point of contact requirements, with varying degrees of guidance. At the Mortgage Bankers Association’s recent annual conference in Chicago, Diane Pendley, a managing director at Fitch Ratings, said servicers have implemented SPOC guidelines in at least eight different ways. ...

Fannie Mae, Freddie Mac and their federal regulator are facing considerable negative pushback from the mortgage industry about their controversial plan to change the economics of the mortgage servicing industry. The Federal Housing Finance Agency and the government-sponsored enterprises are trying to come up with a system that will provide more resources for servicing distressed loans and reduce the volatility lenders face as a result of carrying mortgage servicing right assets on their books. In addition to ultimately improving servicing quality for GSE loans and reducing default losses, the agencies appear to...