The credit rating industry is generally making progress in implementing a landslide of new regulatory requirements – both in the U.S. and from overseas regulators – but several firms continue to wrestle with conflict-of-interest standards and other issues, according to an annual report released this week by the Securities and Exchange Commission. Problems were found at all 10 ratings firms. The three larger nationally recognized statistical rating organizations – Standard and Poor’s, Moody’s Investors Service and Fitch Ratings – all have more than 1,000 credit analysts and credit analyst supervisors, while...

The improvements that the Federal Housing Finance Agency is expected to make to the government’s Home Affordable Refinance Program will likely come at the expense of MBS investors, say experts. The outlines of an expanded HARP are far from clear, but the FHFA is said to be giving serious consideration to lifting the 125 percent loan-to-value limit, in addition to waiving loan-level pricing adjustments, representation and warranties imposed on lenders, valuation requirements and the portability of mortgage insurance. The agency, which oversees Fannie Mae and Freddie Mac, is expected to make an...

New issuance of mortgage- and asset-backed securities faltered in the third quarter, although production levels were gaining strength in September. A new Inside MBS & ABS analysis reveals that $330.12 billion of ABS and residential MBS were issued during the third quarter, a decline of 6.3 percent from the previous three-month period. The surprisingly tepid increase in residential MBS issuance was not nearly enough to offset a substantial drop in non-mortgage ABS activity. Non-mortgage ABS issuance fell 43.4 percent from the second to the third quarter, sinking to $24.84 billion and reversing the very...(Includes one data chart)

Debt-for-equity, a strategy commonly used in buyout deals among companies in Europe, is being floated as an idea to help underwater U.S. homeowners and the lenders avoid taking bigger losses if the mortgage ends up going to foreclosure. In a debt-for-equity arrangement, the borrower would refinance an underwater mortgage for a new loan that reflects the house’s current market value as an alternative to going to foreclosure. In return for reducing the loan amount, the lender takes an equity position that allows it to share in any future house price appreciation.Proponents say...

Two strongly pro-consumer mortgage lending initiatives underway at the Consumer Financial Protection Bureau are nearing completion, top agency officials told industry representatives recently. One project nearing the finish line is the ability-to-repay rulemaking the bureau inherited earlier this year from the Federal Reserve Board. The final rule will be unveiled “early next year in order to provide clarity to the market as quickly as we can, without sacrificing the quality of our analysis,” said Raj Date, special advisor to the Secretary of the Treasury for the CFPB, in comments before attendees at a conference sponsored by SourceMedia. “I’m a real believer in...

The strongest mortgage insurers benefit the most if the Federal Housing Finance Agency follows through on recent comments that it is considering expanding use of MI as one of a number of potential risk sharing strategies for the government-sponsored enterprises, according to a recent report by Moody’s Investors Service. Moody’s noted that uncertainty about the role of private MI in a post-GSE environment “remains a key credit concern” for the industry. “If the FHFA opted for an increase in mortgage insurance as a way to share risk, even as the GSE mortgage universe shrinks, the action would likely to be a...

Total capital backing the FHA single-family program rose modestly during the second quarter, according to a new report from the Department of Housing and Urban Development, while the demographics of borrowers served by FHA tilted slightly toward those with lower credit scores. For the first time since 2008, the share of new FHA loans for borrowers with scores below 680 edged higher. HUD attributed the change to a drop in lending to high-score borrowers and an increase in purchase-money lending for borrowers with scores below 680. Average FICO scores in new FHA business began to climb in the third quarter of 2008 (662) and...

A regional inspector general report found “material underwriting deficiencies” in a clump of FHA loans originated by Countrywide Financial, and though Bank of America may end up paying about $1 million to settle the charges, the case could be a harbinger of bigger losses to come. The Department of Housing and Urban Development inspector general for five upper midwest states singled out Countrywide for an audit because the company’s average default-to-claim rate was high for the region. The IG audited just 14 FHA loans, but half of them contained material underwriting deficiencies, mostly failing to...

State attorneys general trying to negotiate a big-ticket settlement with top mortgage servicers saw their coalition fracture further over the past week, including a decision by Massachusetts to move independently toward litigation. A major stumbling block continues to be divergent views among the states on whether lenders should get immunity from non-servicing issues such as potential litigation over securitization as part of the deal. The widely held view is that top banks were willing to put up a combined $20 billion to be used to help struggling borrowers to settle legal challenges that were spawned by...

With mortgage interest rates touching 50-year lows, the volume of new business at Fannie Mae and Freddie Mac struggled to gain positive traction during the third quarter, according to a new market analysis and ranking based on the Inside Mortgage Finance GSE MarketScope. The two government-sponsored enterprises churned out $177.2 billion of new single-family mortgage-backed securities during the three months ending in September. That was up 14.3 percent from the second quarter, but it still ranked as the second-lowest production level since financial markets tanked at the end of 2008. And it left GSE single-family business volume so...(Includes one data chart)