The three federal banking agencies over the past week released proposed rules to implement the Basel III regulatory capital reforms and changes required by the Dodd-Frank Act that many observers predict will influence bank participation in the mortgage market. The proposed changes would increase bank capital requirements and re-calibrate risk-based capital charges. One of the key changes stemming from the Basel III accord reached by international bank regulators would limit the amount of mortgage servicing rights, along with investments in certain non-consolidated entities and deferred taxes, to no more...

The agency mortgage servicing market continued to grow during the first three months of 2012, although there is some evidence that banks are beginning to pull back from the sector. The Federal Reserve late last week reported that the total supply of home mortgage debt outstanding fell by 0.9 percent during the first quarter. It marked the 16th consecutive quarterly decline since the first quarter of 2008, when the housing market began to crater. The agency estimated that $10.179 trillion of home loans were outstanding at the end of March, the lowest level since...(Includes three data charts)

Mortgage industry officials are anxious about the Consumer Financial Protection Bureau’s upcoming rulemaking on mortgage servicing and have provided some empirical data and a number of principles they think the bureau ought to follow. The American Bankers Association recently provided the CFPB with excerpts from its annual real estate survey to influence the CFPB’s determination as to whether it should exempt, in whole or in part, certain categories of servicers or servicing arrangements from the bureau’s upcoming servicing requirements. Of the 186 banks that participated, roughly 86 percent had assets of...

The Department of Housing and Urban Development is working on a mortgagee letter to guide FHA-approved lenders on their use of credit overlays to protect themselves from potential liability in single-family mortgage transactions. In remarks at a Women in Housing and Finance meeting this week in Washington, DC, Acting FHA Commissioner Carol Galante said the department is concerned about FHA lenders boosting credit score requirements much higher than what the FHA would allow. Galante said lenders are requiring credit scores of 700 and higher, well above the traditional FHA score requirement of 640...

Members of Congress are leaning on the Department of Housing and Urban Development to loosen FHA underwriting standards for condominiums, echoing trade group concerns, although most financing for these properties is provided by Fannie Mae and Freddie Mac. The letter from 69 congressmen, which included members from both sides of the aisle, asked HUD to relax guidelines on owner-occupancy limitations which require that at least 50 percent of a building’s units be occupied for borrowers to be eligible for FHA financing. They also want the FHA to ease up on delinquent assessment standards and certification...

While modifications through the Obama administration’s Making Home Affordable programs have slowed in pace, the now-implemented “Tier 2” expansion may soon increase activity. New activity in the program was down in every category during the first quarter of 2012, according to an Inside Mortgage Finance analysis of Treasury Department data. The number of new trial modifications fell 9.0 percent from the fourth quarter, while new permanent mods were down 21.2 percent. Because a major servicer in January revised the number of trial mods it had offered since the program began, it’s...(Includes one data chart)

The Federal Housing Finance Agency this week proposed to reduce the affordable housing goals for Fannie Mae and Freddie Mac through 2014. The low-income housing goal would be lowered from the current 27 percent to 20 percent, and the very-low-income target would drop slightly, from 8 percent of the government-sponsored enterprises’ business to 7 percent. The agency has not yet calculated the GSEs’ performance on their 2011 affordable housing goals, although un-verified calculations by both companies show that they missed several targets last year. That was also the case in 2010. In 2010, the...

The Department of Housing and Urban Development will sell an estimated 5,000 nonperforming mortgages on the brink of foreclosure in September under an expanded FHA loan-sale program aimed at preventing further growth of the agency’s massive inventory of real estate owned properties. How the deals under the Distressed Asset Stabilization Program will be structured and priced is still not clear. The details are being worked out, said a HUD spokesman. The DASP is an expansion of an FHA pilot program, the Mortgage Acquisition and Disposition Initiative, which began in 2010 and has resulted in the purchase...

A continued outpouring of concerned industry commentary about the Consumer Financial Protection Bureau’s pending ability-to-repay rule has prompted the bureau to hit the reset button on the public comment period, giving the mortgage lending industry another opportunity to address some limited, specific issues before the rule becomes final. During a hearing in the Senate Banking, Housing and Urban Affairs Committee, Sen. Mike Crapo, R-ID, pressed his concerns about the rule with CFPB Director Richard Cordray and questioned him about the bureau’s intentions. “The housing credit market...

The Consumer Financial Protection Bureaufs recently proposed method of extending its supervisory powers to nonbank mortgage lenders it considers potentially risky seems fairly straightforward. But look closely and several potential sinkholes emerge for such lenders, one leading attorney serving the mortgage industry suggested. Despite its outward simplicity, the proposed process presents several potential pitfalls for nonbanks, according to Eric Mitzenmacher, an associate attorney in the Washington, DC, office of the K&L Gates law firm. To begin with, the bureau does not define griskh...