Although additional defendants sued by the Federal Housing Finance Agency are expected to sooner or later cut deals to settle fraud charges over the sale of non-agency MBS to Fannie Mae and Freddie Mac, banks with larger exposures may calculate that their best bet is to let it play out in court, according to a new report by Fitch Ratings. Fitch noted that the FHFA’s announcement last month that UBS Americas will pay some $885 million to settle claims concerning MBS that UBS sold to the two government-sponsored enterprises is a significant event as other defendants crunch the numbers before deciding whether to proceed with a lengthy and expensive trial or to cut their losses. “Although not necessarily setting a formal precedent, the high settlement costs to UBS relative to the outstanding portfolio amount could lead...

Although Fannie Mae and Freddie Mac are at near records on issuing bonds backed by multifamily mortgages, the Federal Housing Finance Agency is now soliciting comments from the public on how to pare the role of the government-sponsored enterprises in that business. The agency recently published notice that it wants input from the industry in evaluating “alternatives for further contracting the multifamily business” and is seeking views “on the potential market impact of various strategies.” According to figures provided to Inside MBS & ABS, Fannie is...

Mortgage servicing transfers are likely to continue, particularly to nonbanks like Ocwen and Nationstar, with modest effect on most non-agency deals, according to a new study from Barclays Securitized Products Research. Researchers said the valuation effect of these servicing transfers is generally modest for most senior securities, with the exception of some that are likely to benefit from certain factors. Investors should also be aware of potential forbearance-related write-downs in these transferred deals, which may adversely affect subordinate bonds in the structure, they cautioned. The study attributes...

Fannie Mae will lower its maximum LTV. Mortgage insurance firms are not happy. Meanwhile, NAMB blames shrinking application volumes on summer vacations.

Recent public comments by President Obama and Congressional leaders have seemingly re-energized the debate over housing finance reform even though some are questioning the cashiering of the now profitable GSEs. But as lawmakers draft and/or refine dueling bills, it remains to be seen whether summer recess chatter will translate into an actionable legislative result this fall, say industry observers. In a highly anticipated speech last week, the president didn’t break much new ground in calling for Fannie Mae and Freddie Mac to be wound down through a “responsible transition.” However, Obama listed among his key reform principles that private capital should be in a first-loss position and the government should provide an appropriately priced, explicit government guaranty to ensure continued access to the 30-year fixed-rate mortgage.

When the government took control of Fannie Mae and Freddie Mac almost five years ago, the thought of securitizing multifamily loans had already been planted, but both preferred the idea of holding the paper in portfolio for obvious reasons: high returns and ultra-low delinquencies. Today, both GSEs are securitizing a record amount of MF mortgage-backed securities – but all of that is about to change with the Federal Housing Finance Agency forcing them to shrink their balance sheet holdings including multifamily. Moreover, FHFA is now soliciting comments from the public on how to whittle down the GSEs’ role in the MF business. The agency recently published notice that it wants input in evaluating “alternatives for further contracting the multifamily business” and is seeking views “on the potential market impact of various strategies.”

Fannie Mae and Freddie Mac are eliminating or tweaking certain servicing initiatives, the two GSEs announced last week in separate bulletins. Effective Aug.1, the two enterprises have eliminated the complete Borrower Response Package and Delinquency Improvement Performance Standard, and the related incentive and compensatory fee structure.

The Federal Housing Finance Agency has hired Washington-based Spencer Stuart to help find a chief executive to man the helm of the “common securitization platform” project. One former Fannie Mae official familiar with the effort told Inside The GSEs that the project has taken on a more “serious” urgency at the agency. “I’m not sure of the timeline, but it’s moving along.” One mortgage official who was approached about the job – but who made it clear he is not interested – said that the CEO FHFA hires “will need to be creative, revolutionary and good at many things.”

The Federal Housing Finance Agency is ready, willing and able to use its big stick as regulator of the GSEs to play hardball against municipalities that move forward with proposed efforts to seize underwater mortgages via local government eminent domain powers, say industry observers. One year ago nearly to the day after the FHFA warned “action might be necessary” to protect the GSEs, the Finance Agency released a legal memorandum outlining a number of steps it could take in response to an eminent domain action to restructure mortgages. The FHFA reiterated its “significant concerns” as conservator of Fannie Mae and Freddie Mac, as well as regulator of the 12 Federal Home Loan Banks, that widespread seizures of the loans and their subsequent refinancing “presents a clear threat to the safety and sound operations of the GSEs.”

The Federal Housing Finance Agency may pursue a fraud lawsuit against Ally Financial despite the bankruptcy status of Ally’s Residential Capital mortgage unit, a Manhattan federal judge ruled this week. U.S. District Court Judge Denise Cote denied Ally’s request to stay the FHFA’s litigation, a typical motion by bankrupt debtors to defer litigation as they seek to reorganize. In 2011, the FHFA filed 18 lawsuits alleging that Ally and other large financial institutions misrepresented the quality of non-agency mortgage-backed securities sold to Fannie Mae and Freddie Mac before the 2008 financial crisis.