New rules set to take effect next month that would permit eligible underwater homeowners holding Fannie Mae and Freddie Mac mortgages to leave behind the home and the remaining loan debt are designed to make the best out of a bad situation, say the GSEs. Starting March 1, GSE servicers will have expanded authority to approve a deed-in-lieu of foreclosure to non-delinquent Fannie or Freddie borrowers who can no longer stay in the home and can demonstrate a “hardship.”Although deed-in-lieu servicing guidelines were issued by Fannie and Freddie in November, a published report this week gave it renewed attention and speculation that the GSEs were letting borrowers off too easily.

The Federal Housing Finance Agency and other government regulators could “permanently enshrine” Fannie Mae, Freddie Mac and other government housing entities “as the only large-scale source of mortgage credit in our country” if they fail to design a new mortgage rule with care, says one senior Republican senator. Sen. Bob Corker, R-TN, a member of the Senate Banking, Housing and Urban Affairs Committee, in a letter last week urged federal regulators to “simplify and synchronize underwriting standards for new mortgage lending rules to avoid permanently regulating the private sector out of the housing finance business.” Corker, in his letter to the FHFA, Federal Reserve, Department of Housing and Urban Development, and the Securities and Exchange Commission, among other agencies, noted that the proposed, but yet to be finalized, “qualified residential mortgage” rule exempts loans sold to Fannie, Freddie and the Federal Housing Administration.

Fannie Mae and Freddie Mac dominated the residential mortgage market to a greater degree in 2012 than the GSEs ever had before, according to a new Inside The GSEs analysis. Fannie and Freddie issued a whopping $1.675 trillion of new single-family mortgage-backed securities last year, which equaled 75.7 percent of total market production. That was up from 72.1 percent in 2011 and just shy of the record 77.0 percent the GSEs recorded back in 2008. It was also the biggest annual output since 2009, when Fannie and Freddie issued $1.776 trillion in new MBS. Although part of the increase in GSE share of new MBS issuance last year resulted from the rapid growth of the Home Affordable Refinance Program, their peak market share for the year came early, during the first quarter. HARP activity was heaviest during the second and third quarters.

A senior House Democrat has again filed legislation seeking a Congressional investigation of Fannie Mae’s and Freddie Mac’s past and present management and decision making authority.Filed by Rep. Marcy Kaptur, D-OH, in mid-January, H.R. 234, The Fannie Mae and Freddie Mac Investigative Commission Act, would empower a Congressional body to “investigate the policies and practices engaged in by officers and directors at Fannie Mae and Freddie Mac responsible for making the decisions that led to the enterprises' financial instability and the subsequent Federal conservatorship” of the two GSEs. The Fannie Mae and Freddie Mac Investigative Commission would be composed of eight lawmakers – appointed by House and Senate leaders from both political parties – to examine the practices, decisions and policies of the two GSEs that affect the financial stability of the mortgage firms.

Mortgage lenders large and small continued to report strong earnings on their mortgage banking operations during the fourth quarter of 2012, but the year that likely will go down as the most profitable in the industry’s history ended on a downslope. A new Inside Mortgage Trends analysis of year-end earnings reports from 23 lenders reveals a staggering combined earnings of $32.74 billion for the full year of 2012. The same group posted an aggregate net income of $5.35 billion, a total ... [Includes one data chart]

There is reason to believe the mortgage banking industry’s record level of profitability may have peaked, as gain-on-sale margins have already begun to slip and more dark clouds appear on the horizon. “Mortgage banks have enjoyed record high gain-on-sale margins over the past several quarters,” analysts at Compass Point Research and Trading noted in a recent market review. They attributed this trend mostly to two primary factors: limited capacity in the mortgage market to handle increased demand and ...

One after another, it appears that residential lenders are dipping their toes back into the correspondent lending channel, thanks in part to the fat profit margins tied to securitization and retaining the underlying servicing rights. Over the past few weeks, a handful of lenders announced their intention to either launch a correspondent lending division or jumbo conduit. Firms entering the correspondent space include Envoy Mortgage and Real Estate Mortgage Network. The conduit ... [Includes one data chart]

The government-sponsored enterprises’ share of purchase-mortgage originations has increased each of the last two years, according to a new analysis by Inside Mortgage Trends. The shift in market share includes decreased purchase-mortgage originations for the FHA and a lack of housing inventory, prompting increased home prices. Some $377.2 billion in agency purchase mortgages were originated in 2012, with a 66.5 percent share for Fannie Mae and Freddie Mac combined. In 2010, the GSEs ... [Includes one data chart]

The new ability-to-repay (ATR) rule and the “qualified mortgage” definition will result in more predictable, less costly servicing for prime QMs and increased complexity for subprime and non-QMs, according to an analysis by Deloitte Touche. The ATR rule defines an ability-to-repay standard for mortgages, including eight borrower characteristics to be considered in the lending decision. It also creates a QM definition that clarifies compliance with the ATR standard for loans with certain features and ...

Final rules establishing national mortgage servicing standards may reduce the incentives for states to adopt their own varied, unique versions, thus reducing the patchwork of state mortgage servicing laws. At the same time, however, the final rules are a floor and states – and the government-sponsored enterprises – may adopt more stringent consumer protections, cautioned attorneys with SNR Denton. An analysis by the Washington, DC, law firm said the final rule issued by the Consumer Financial Protection Bureau ...