As the Securities and Exchange Commission continues to consider how to reform the rating process for structured finance transactions, including non-agency MBS, industry analysts affiliated with the Brookings Institution suggested that the fix doesn’t require altering the issuer-pay model that has been in place for more than 40 years. Instead, the SEC should help establish transparent, numerical benchmarks, according to two industry participants, shifting away from the current system of letter-based ratings that are also used for corporate debt and sovereign debt. Ann Rutledge, a founding principal at R&R Consulting, a credit rating service, and Robert Litan, a nonresident senior fellow at The Brookings Institution, detailed their proposal in an economic study recently published by Brookings. “Securities that are rated only in an ordinal fashion – in order of likelihood of default – can be...
After hearing from some market participants about certain unintended consequences, the Financial Industry Regulatory Authority decided to revise its earlier proposal to establish margin requirements for to-be-announced transactions to accommodate smaller players in the market. Last week, its board authorized FINRA to file with the Securities and Exchange Commission the revised amendments to FINRA Rule 4210 (Margin Requirements) to establish margin requirements for TBA transactions (including adjustable-rate mortgage transactions), specified pool transactions, and transactions in collateralized mortgage obligations, with forward settlement dates. The proposal is...
A significantly bigger Ginnie Mae would be placed in charge of all MBS issued with a government backing while Fannie Mae and Freddie Mac would be wound down and stripped of their government sponsorship under a bill filed last week by House Democrats. The legislation – the Partnership to Strengthen Homeownership Act, H.R. 5055, sponsored by House Democrats John Delaney (MD), John Carney (DE) and Jim Himes (CT) – has zero chance of gaining traction this year. It would create a new Ginnie Mae MBS backed by conventional mortgages that would have the full faith and credit of the federal government while tapping private capital to absorb some of the risk. The new structure under the Delaney-Carney-Himes bill would create...
Industry reaction to the FHFA IG report on nonbank and small lender risk was swift. Maybe Fannie Mae is better off having Countrywide as its biggest customer again?
Impac Mortgage recently launched a suite of products that don’t meet the Consumer Financial Protection Bureau’s standards for qualified mortgages. The non-QMs are available via the correspondent channel and are aimed at prime borrowers. The lender refers to its offerings as “Alt QMs,” including a jumbo option, a program for loans slightly outside of agency guidelines and a program that purposefully excludes analysis of a borrower’s tax returns ...
Jumbo borrowers in the market for mortgage financing often decide to work with the bank they already have a relationship with, according to new qualitative survey results from the Campbell/Inside Mortgage Finance HousingPulse Tracking Survey. Real estate agents participating in the survey were asked what factors drive an affluent homebuyer’s lender selection when opting for mortgage financing instead of an all-cash home purchase. “I’ve found they like to ...
The Consumer Financial Protection Bureau’s request for comments on whether to allow for a right to cure on debt-to-income ratio issues for qualified mortgages prompted the typical divisions between lenders and consumer advocates. Lenders suggest that borrowers would benefit from the adjustment to QM standards, while consumer advocates warn that the change would weaken QM protections and encourage sloppy underwriting. The 43 percent DTI ratio standard for ...
SunTrust Banks settled criminal allegations this month relating to activity under the Home Affordable Modification Program. The $320 million settlement marked the first time a HAMP servicer paid a monetary penalty under the program. To this point, penalties for violations of HAMP guidelines have been relatively lenient, with the harshest maneuver being a temporary stop in incentive payments from the program. However, an investigation led by ...
CORRECTION: The jumbo mortgage-backed securities issuers and underwriters ranking published in the July 4, 2014, issue of Inside Nonconforming Markets has been revised due to a data error. The revised chart is available online. Citigroup agreed to a $7.0 billion settlement this week with federal regulators and certain states related to non-agency MBS activities prior to 2009. Associate Attorney General Tony West suggested that ... [Includes seven briefs]
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