The supply of outstanding residential MBS in the market continued to grow at a measured pace during the second quarter of 2017, thanks to the robust single-family MBS machines at Fannie Mae, Freddie Mac and Ginnie Mae. A total of $6.675 trillion of single-family MBS was outstanding as of the end of June, according to a new Inside MBS & ABS analysis. That was up 0.8 percent from the end of March, and it represented a record 64.0 percent of outstanding single-family mortgage debt. The Federal Reserve this week reported that home loan debt outstanding rose 0.7 percent to $10.430 trillion during the second quarter. All the MBS growth was...[Includes three data tables]

Issuance of non-agency MBS backed by newly originated home loans remains well below levels seen before the financial crisis. While new regulations have stopped some pre-crisis loan types from being originated, industry participants suggest that other major factors are also limiting the supply of loans available for MBS. Chris Helwig, a managing director at Amherst Pierpont, noted that banks are competing for prime jumbos and holding them in portfolio, and many borrowers who previously might have received subprime mortgages opt for FHA loans. “All that is left for non-agency MBS is...

The great unwinding of the Federal Reserve’s massive intervention in the MBS market post-financial crisis is set to begin soon. This week, surprising no one, the U.S. central bank’s Federal Open Market Committee announced it will start to normalize its huge balance sheet next month along the parameters it first outlined in June. From October through December, the decline in the Fed’s securities holdings will be capped at $6 billion per month for Treasuries and $4 billion per month for agency MBS. Next year, the declines will gradually increase to $30 billion a month for Treasuries and $20 billion a month for MBS. Fed Chair Janet Yellen reiterated...

The average daily trading volume in agency MBS totaled a tepid $199.8 billion in August, the lowest reading since May, according to figures compiled by the Securities Industry and Financial Markets Association. Then again, volume wasn’t too far off trading activity in the prior two months, which came in at $200.5 billion and $200.9 billion. It appears that investors haven’t had...

In a research note published Friday, Cowen & Co. notes the letter is an indication these groups believe allowing the GSEs to retain capital will prolong the conservatorships.

An impossible scenario, one that keeps Federal Housing Finance Agency Director Mel Watt up a night? We shall see...

Another refi spurt in the works? It may’ve looked that way a few weeks ago, but...

Subservicing contracts topped $1.97 trillion at June 30, a 4.3 percent gain from March and a 28.2 percent jump over the past year, according to an exclusive Inside Mortgage Finance survey. Overall, roughly 19.9 percent of all residential loans are now being processed by these “outsourcing” vendors, who do not own the underlying strip of receivables and instead receive a portion of the servicing fee for doing all the grunt work. The subservicing sector continues...[Includes one data table]

Lenders and investors at the ABS East conference this week hit officials from the Consumer Financial Protection Bureau with a number of complaints about the agency’s mortgage rules. The bureau officials suggested that data will have more of an impact on policy changes than general complaints. Patrick Orr, a policy analyst at the CFPB, reiterated that the bureau is accepting feedback and considering changes or guidance for the TILA-RESPA Integrated Disclosure rule, special qualified-mortgage standards that apply to loans eligible for sale to the government-sponsored enterprises and aspects of the ability-to-repay rule, among other issues. A representative from one lender said...

Unless the Federal Housing Finance Agency acts soon, Fannie Mae and Freddie Mac will see their capital buffers fall to zero on Jan. 1, 2018. Having zero capital may not be a big deal, initially – but a new complication has arrived in the form of hurricanes Harvey and Irma. According to Tim Rood, chairman of The Collingwood Group, the government-sponsored enterprises are not looking at losses “that will cost tens of billions of dollars – but they don’t need to be. The capital buffer is small as it is. And if a credit event happens, it could wipe out the thin layer of capital they have in a hurry.” If Rood – a former Fannie executive – is correct, the GSEs might have...