The Government Accountability Office recently confirmed the view widely held in the mortgage finance industry that federal regulators are not doing enough to analyze the cost and other effects of implementing the Dodd-Frank Act. “Little is known about the actual impact of the final Dodd-Frank Act rules, given the short amount of time the rules have been in effect,” the GAO said. The government watchdog noted that federal financial regulators are required to perform a variety of analyses, but the requirements vary and none of the regulators are...

A proposed Senate bill to steadily wind down Fannie Mae and Freddie Mac over the course of a decade appears to have some support at the Federal Housing Finance Agency, where the acting director is eager for Congress to move toward resolving the three-year-old conservatorships of the two government-sponsored enterprises. S. 1834, the Residential Mortgage Market Privatization and Standardization Act of 2011 would gradually reduce the two GSEs over 10 years through an unusual mechanism. Instead of guaranteeing the entire MBS trust as they...

Freddie Mac this week announced a new class of single-family MBS backed by mortgages previously repurchased from MBS because they were in serious delinquency. Both government-sponsored enterprises began aggressively buying seriously delinquent loans out of their MBS trusts at the beginning of 2010 because new accounting rules required them to consolidate all their outstanding MBS on their balance sheets. Buying the distressed loans out of the MBS trusts had no impact on their financial accounting, but it allowed them to better manage...

An underwater borrower’s strategic decision to default on a mortgage is triggered not only by economic conditions but how fast the notion can be transmitted throughout a society, which could either result in a full market recovery or a systemic collapse, according to a new mortgage industry study. The study, Strategic Default in the Context of a Social Network: An Epidemiological Approach, suggests that the key to understanding strategic default is to look at it in terms of a disease and how contagious it is. “As social animals, humans knowingly or otherwise look to their peers before...

The outstanding supply of subprime mortgages in the market continued to decline in the third quarter, but three special servicers significantly increased their portfolios, according to a new ranking and analysis by Inside Nonconforming Markets. The growing servicers – Ocwen Financial, Nationstar Mortgage and Walter Investment Management – all focus on high-touch servicing. Special servicing is in particularly high demand as banks have started to sell their subprime holdings, a trend expected to...

The high-cost loan limits for FHA mortgages will be re-elevated to $729,750 through at least the end of 2013 while the government-sponsored enterprises’ loan limits will remain unchanged under appropriations legislation approved by Congress this week. Industry participants suggest that the FHA’s newly higher loan limits will have little impact on non-agency jumbo activity. The revised FHA loan limits were included in “mini-bus” appropriations legislation for the Department of Housing and Urban Development and other federal agencies. The bill – which also contained a Continuing Resolution to avoid a government shutdown – was...

The Federal Housing Finance Agency’s recent proposal to revamp servicer compensation has received mixed reactions from non-agency participants. High-touch servicers approve of the landscape-shifting fee-for-service proposal but analysts suggest that the system would be much more difficult to establish for non-agency mortgages than for agency loans. Ocwen Financial and other servicers that predominantly handle delinquent mortgages favor the FHFA’s proposal that would significantly increase the fees paid to service delinquent loans and lower the base servicing fee for performing loans, perhaps to...

Two new bills aimed at increasing non-agency activity were introduced in the Senate last week. One would wind down the government-sponsored enterprises while the other would establish a framework for covered bonds. S. 1834, “The Residential Mortgage Market Privatization and Standardization Act” introduced last week by Sen. Bob Corker, R-TN, would gradually reduce the portion of the mortgage-backed security guarantee provided by Fannie Mae and Freddie Mac. Within 180 days of the bill’s enactment, the GSEs could only issue MBS with a guarantee for 90 percent of a bond. The guarantee on...

President Obama this week signed into law a stop gap spending measure, which, among other things, reinstates temporary higher limits for loans insured by FHA. The minibus bill, which combines several appropriations bill, passed the house on a vote of 298-121. The Senate approved previously approved it 70-30. The measure raises the FHA’s maximum loan limit back up to $729,750 after it had fallen to the permanent statutory level of $625,500 on Oct. 1, and extends it through the end of 2013. The new limit is effective immediately. After being extended three times – in 2008, 2009 and 2010 – the higher loan limits finally expired on Oct. 1 this year and were ...

The FHA Mutual Mortgage Insurance Fund for single-family loans again fell short of minimum capital standards, spurring renewed warnings of a taxpayer bailout if losses continue to mount. According to FHA’s annual report to Congress on its financial status and the condition of the MMI Fund, reserves dropped to 0.24 percent in 2011 from 0.50 percent last year. This means that the agency is holding only $2.6 billion of excess reserves, down from $4.7 billion the year before, against roughly $1.1 trillion of FHA-insured loans. The report also noted that unless housing prices stabilize and losses drop, the fund has a 50 percent chance of a taxpayer bailout. The negative effects in the report’s “base case” scenario were caused by ...