A recession resulting from the federal government taking the U.S. economy over the fiscal cliff would leave Fannie Mae and Freddie Mac vulnerable to higher credit losses and make the two government-sponsored enterprises unprofitable again, according to Moody’s Investors Service. Moody’s this week warned that Washington’s failure to reach a tax and spending agreement would also force the GSEs to ride out the shockwaves of potential financial market disruptions on their derivatives trades. “In our current central economic scenario, both Fannie Mae and Freddie Mac are...

As the wait for the highly anticipated “qualified mortgage” final rule continues, its impact on FHA lending programs remains uncertain. Concerns have been raised over the possibility that the final QM rule the Consumer Financial Protection Bureau is finalizing may establish a “safe harbor” for prime loans with a maximum debt-to-income ratio of up to 43 percent. This could have implications for FHA loans, which allow higher back-end ratios under certain circumstances, according to some lenders and industry participants. At what point the DTI ratios will ...

The secondary market value of residential mortgage servicing rights has been in the doldrums since the housing bust, but all that could change in the coming months – thanks to both new investor interest and rising rates. And not only are values picking up but so are deals and the number of MSR valuations performed by analytic firms. “We’ve brokered 15 to 20 deals in 2012,” said Mark Garland, president of MountainView Servicing Group. “Last year we did half that.” In 2012, MountainView performed...

Industry observers are holding out fading hope that Congress will act on time-sensitive mortgage-related bills before the lame-duck session draws to a close, but as the clock winds down, real estate interests are already adjusting their legislative expectations for 2013. At the top of the list of mortgage bills being watched closely is the extension of the Mortgage Forgiveness Debt Relief Act of 2007. The law exempts up to $2 million in mortgage debt forgiven by a lender in a short sale, loan modification or foreclosure from federal taxation. Despite support from both political parties, industry groups and consumer advocates, legislative efforts to renew the act have...

The retreat of some large loan aggregators from the mortgage market has been a challenge for many small loan originators, but Federal Home Loan Bank officials say the Mortgage Partnership Financing Xtra program has gone a long way to pick up the slack. Through MPF Xtra, six FHLBanks provide member institutions an alternative for selling first mortgages that they originate that allows them to retain customer relationships without taking on interest rate and prepayment risk. The program is one of several options under the Mortgage Partnership Finance program, which is run and managed by the FHLBank of Chicago. Introduced in 1997, the MPF provided...

Potential homeowners need to reset their expectations about homeownership, and the federal government should eventually reduce its role in housing finance, according to Brian Moynihan, CEO of Bank of America. In a speech late last week at the Brookings Institution, Moynihan suggested that the financial crisis has created an opportunity to change long-held views among homeowners, the federal government and lenders. He said the conversation about homeownership rates should shift from what percentage of Americans own homes to what is the right solution at the right time for each individual or family. “The past five years of high unemployment and underwater home values have taught...

Mortgage securitization rates remained at record levels through the third quarter of 2012, with 86.3 percent of primary market originations being financed as MBS, according to a new analysis by Inside MBS & ABS. A total of $1.15 trillion of MBS backed by recently originated loans were issued through the first nine months of the year, soaking up most of the $1.33 trillion in new production during that period. The market is on track to top the record 84.4 percent securitization rate set for the full year back in 2009, after two years in which the rate had drifted somewhat lower. During the third quarter, the securitization rate surged...[Includes one data chart]

Two separate white papers from industry trade groups on reform of the government-sponsored enterprises call for a strong government role to provide stability and liquidity in multifamily mortgage finance. The Mortgage Bankers Association called for a system of private capital finance for multifamily housing, with a focus primarily on securitization and the federal government serving as a catastrophic insurer. The program would be funded through risk-based premiums paid by the entities that securitize the loans, according to Brian Stoffers, president of CBRE Debt and Equity Finance. “We recognize...

Despite the ever-increasing volume of political chatter that the White House is poised to nominate a new director of the Federal Housing Finance Agency, industry observers tell Inside The GSEs they aren’t altogether convinced the Obama administration is able or even willing to effect agency regime change and assume full ownership of the GSEs at this time. Following President Obama’s re-election last month, speculation shifted quickly from “if” to “when” Edward DeMarco, a Bush-era hold-over who recently began his fourth year as the FHFA’s “temporary” head, would be replaced.

Despite gains in oversight and reform of the compensation packages for Fannie Mae’s and Freddie Mac’s top-level executives, the Federal Housing Finance Agency needs to beef up its reviews and examinations of the pay packages for the scores of vice presidents and directors currently employed by the two GSEs, according to the Finance Agency’s official watchdog. The FHFA’s Office of Inspector General report released this week noted a “significant cost” involved in the compensation of the two GSEs’ nearly 12,000 employees.