Fannie Mae and Freddie Mac’s guarantee fee stucture continued to convey cross-subsidies from lower-risk mortgages to higher-risk mortgages but overall cross-subsidization in 2010 declined from previous years, according to a report from the Federal Housing Finance Agency. The agency said cross-subsidization in single-family guarantee fees charged by the two government-sponsored enterprises remained evident in 2010 across product types, credit score categories and loan-to-value ratio categories. “There were cross-subsidies from mortgages that posed lower credit risk, on average, to loans that posed higher credit risk. The greatest...

Home-purchase mortgage lending continues to sputter along in 2011 and lender hopes of any increased mortgage production in the months ahead remain focused on declining mortgage rates and the refinance sector – and not the listless housing market. According to numbers compiled by Inside Mortgage Finance, home-purchase mortgage originations totaled an anemic $209 billion in the first half of this year – the lowest level seen in more than a decade. While weak home sales in 2011 are the major reason for the low home-purchase mortgage activity, another big factor is the prevalence of cash purchases in the current housing market. Results from...(Includes one data chart)

The supply of mortgage debt outstanding continued to decline in the second quarter of 2011, reaching levels not seen in nearly five years. The Federal Reserve reported that single-family mortgage debt totaled $10.396 trillion as of the end of June, down 0.5 percent from the end of the previous quarter. It marked the 13th consecutive quarterly decline in the mortgage servicing business, which has shrunk by $783.2 billion since peaking in the first quarter of 2008 at $11.179 trillion. The only sector of the market that’s growing is the Ginnie Mae program, where the supply of the agency’s single-family mortgage securities...(Includes one data chart)

The Federal Housing Finance Agency found itself on the defensive this week following a rapid-fire series of highly critical reports issued by its inspector general that questioned the agency’s capacity to oversee Fannie Mae and Freddie Mac effectively, as well as its decisions in specific cases. The FHFA Office of Inspector General said late last week that the FHFA’s examination program, the primary means by which it supervises and regulates the government-sponsored enterprises, faces “capacity and transparency shortfalls.” “The agency has too few examiners to ensure the efficiency and effectiveness of...

Mortgage lenders originated a significantly higher share of new loan applications in 2010 than the year before, helping to offset a steep decline in consumer demand for mortgage credit, according to an Inside Mortgage Finance analysis of recently released Home Mortgage Disclosure Act data. The total volume of mortgage originations reported under HMDA fell 10.2 percent from 2009 to 2010, ending with $1.576 trillion. Although refinance transactions accounted for 67.1 percent of total HMDA originations last year, the refi market bore the brunt of the downturn, with the dollar volume of refinance production...(Includes one data chart)

In a proposal that could reshape the economics and competitive landscape of the mortgage industry, the Federal Housing Finance Agency this week proposed two alternatives for servicing compensation on future Fannie Mae and Freddie Mac business that could end up being the model for the market beyond the government-sponsored enterprises.“As the recent problems in managing mortgage delinquencies suggest, the current servicing compensation model was not designed for current market conditions,” said FHFA Acting Director Edward DeMarco. “The goal of this joint initiative is to explore alternative models for single-family mortgage servicing compensation that...

New Jersey. In northern New Jersey, 8 percent of mortgages are in foreclosure – twice the share for the United States as a whole, according to a new regional mortgage brief prepared by the Federal Reserve Bank of New York. An additional 4 percent of northern New Jersey mortgages are at least 90 days delinquent, the point at which a foreclosure filing can be initiated. “Combined, 12 percent – or about one in eight mortgages – are seriously delinquent,” the Fed said. “By comparison, the pre-crisis share of mortgages seriously delinquent in this region was less than 2 percent.” But flows of mortgages into foreclosure and delinquency are down from their peak levels, although still considerably up from pre-crisis levels. However, the pool of mortgages already in foreclosure continues to grow because there are more loans entering the foreclosure process than there are loans completing the process each month. Foreclosures are lengthy, often taking many months or even years.

The Consumer Financial Protection Bureau may be making substantial progress on its integrated consumer mortgage disclosure form, but the land title sector is concerned the prototype products generated to date are inadequate when it comes to the disclosure of specific settlement costs. The American Land Title Association told the bureau that the CFPB’s Know Before You Owe project has successfully identified ways to improve the disclosure of loan costs by making them more transparent. However, suggestions for how to disclose some settlement costs, in particular title insurance and attorney fees, have not reached a desired level of transparency and lack the necessary flexibility to avoid consumer confusion.

Among the sensitivities associated with the mortgage industry’s foreclosure struggles, none is more fraught with headline risk and the potential for political pressure than foreclosing on an active-duty servicemember of the U.S. military, a top industry attorney told compliance officials this week. “It’s bad enough when you get it wrong on a regular foreclosure action, but when you get it wrong for one of our servicemembers, that’s really where you’re going to have a reputation killer,” Leah Getlan, assistant general counsel at Capital One, told attendees this week at the Mortgage Bankers Association’s annual regulatory compliance conference in the nation’s capital. “I have seen it from time to time, but thankfully, not that often.”

Certain elements of the Dodd-Frank Act such as the new standard related to unfair, deceptive and abuse acts and practices (UDAAP), along with the Federal Reserve’s “ability to repay” provisions proposal, present “significant litigation risk” to lenders, a top litigation attorney told industry representatives early this week. Speaking to attendees at the Mortgage Bankers Association’s regulatory compliance conference in Washington, DC, on Sunday, Andrew Stutzman, a partner with Stradley, Ronon, Stevens & Young LLP, said, “I’m very troubled by Dodd-Frank in many respects. I think it … and the regulations that are coming out and have come out – the Fed’s ability-to-repay proposal – are extremely complicated and extremely confusing.”