The Senate Banking, Housing and Urban Affairs Committee may not be moving any closer to a decision on reforming the mortgage finance system, but lawmakers should be getting well versed in the various analytic perspectives on the role of the federal government. At a hearing this week, the committee heard testimony from researchers who support winding down Fannie Mae and Freddie Mac as soon as possible and others who say private capital won’t be drawn back into the system unless there is a government guarantee. “There’s absolutely no reason to believe that private capital would immediately step-up – even if it would eventually...

The Federal Housing Finance Agency’s legal action late last week against many of the nation’s largest financial institutions on the grounds they misled Fannie Mae and Freddie Mac about the quality of subprime and Alt A MBS purchased by the government-sponsored enterprises has few positives but plenty of negative potential consequences for the market, experts say. The 17 separate lawsuits filed by the FHFA seek unspecified damages on $196 billion in mortgage securities the two GSEs purchased, mostly between 2005 and 2008. The agency conducted extensive loan-level reviews that allegedly revealed widespread discrepancies between... [Includes two pages of data]

Private investors in agency MBS could lose $13 billion to $15 billion from a new government effort to help current Fannie Mae, Freddie Mac and FHA borrowers refinance, according to a new Congressional Budget Office staff working paper. The Obama administration is expected to announce a revved-up refinance program as part of a new strategy to strengthen economic growth. A “stylized” refinance program analyzed by the CBO would have a relatively small impact on the overall economy, the analysts said. The biggest impact would be on private MBS investors and the estimated 2.9 million households that would likely be brought into the...

Fannie Mae, Freddie Mac and Ginnie Mae produced a total of $84.25 billion of new single-family MBS during August, a sturdy 19.8 percent jump from the previous month, according to a new analysis and ranking by Inside MBS & ABS. Although there was a brief bump higher in production in June, agency MBS issuance has generally been sliding lower since the end of 2010. The decline has corresponded to reduced production of refinance mortgages, which accounted for just 55.1 percent of new originations in the second quarter, down from 67.1 percent for all of last year. New data suggest the refi market is still struggling. Some 63.5 percent of...

Losses on re-performing FHA/VA mortgage pools are expected to rise as servicers cut back on the claims they submit to the Department of Housing and Urban Development and pass on to mortgage securitization trusts instead, according to a recent analysis by Moody’s Investors Service. With FHA experiencing increasing losses in its portfolio, HUD is scrutinizing claims more vigorously for servicing or underwriting defects, which may serve as a basis for denying claims on re-performing FHA/VA pools. Servicers are also required to bring the property to an acceptable conveyance condition. Furthermore, HUD imposes very strict timeline guidelines that FHA servicers must follow. Given the recent servicing irregularities and staffing constraints due to rising defaults, servicers may not always ...

As part of a new jobs and economic growth plan to be announced this week, the White House is expected to include a bid to invigorate a mortgage refinance effort that has failed to live up to expectations. Most observers think the Obama administration will opt for targeted changes to the Home Affordable Refinance Program. In a speech last week, Federal Reserve Board Governor Elizabeth Duke said HARP has been only marginally effective despite Fed estimates that as many as 4 million borrowers meet HARP’s basic eligibility requirements. Through the end of June, some 830,552 borrowers had refinanced their home loans under HARP, which allows... [Includes one data chart]

Despite a continuing glut of distressed properties in the housing market, investors have started dialing back their purchase activity. And the primary reason appears to be a shifting business model that is forcing investors – at least for the time being – to rent rather than flip properties. That’s one of the major findings of the latest Campbell/Inside Mortgage Finance HousingPulse Tracking Survey, which found that the investor share of home purchase transactions slipped to 19.6 percent in July. That was not only down from 21.3 percent in June but also the lowest investor market share recorded in a year. The inability of most investors to...

The Federal Housing Finance Agency this week defended its massive legal action against many of the nation’s largest financial institutions on behalf of Fannie Mae and Freddie Mac over the government-sponsored enterprises’ losses on non-agency mortgage backed security purchases. The Finance Agency contends that 17 financial institutions sold Fannie and Freddie some $196 billion of MBS, mostly between 2005 and 2008, that caused losses to the GSEs for which there should be compensation. Filed late last week in federal and state courts in New York and in federal court in Connecticut, the lawsuits seek damages and civil penalties under... [Includes one data chart]

Experts agree that the federal government plays too big a role in the housing market, but panelists at a Federal Reserve conference last week said there is little consensus on how to fix it. FHA is “not our silver bullet,” observed Janis Bowdler, a director at the National Council of La Raza. “Surely, it’s stepping in while we are in a tight credit market. But it’s no long-term solution.” One problem with FHA is that lenders aren’t required to offer it, which means entire communities are left “credit-starved,” Bowdler said. “This leaves them in the same vulnerable position to predatory lenders that they were in five or six or 10 years ago,” she...

Fannie Mae made its second foray of 2011 into the non-agency MBS market by providing a guarantee wrap on a $690.6 billion deal backed by previously modified FHA and VA mortgages. Government Loan Securitization Trust 2011-FV1 is comprised of government loans originated by Wells Fargo and Wachovia. All the loans were previously securitized in non-agency MBS backed by Fannie wraps, including some that date back to 2001. The average age of the loans since modification is 132 months, and 91.2 percent of them are insured by the FHA. According to the prospectus, 19.8 percent of the loans were 30-days delinquent and 35.9 percent were more than...