The so-called QM Plus alternative for defining qualified residential mortgages under the emerging risk-retention rule for asset securitizations threatens the intent of the Dodd-Frank Act to balance consumer protection and fair access to credit, a top industry official said last week. “We really think that the QM Plus provision goes way too far in tipping the balance” between consumer protection and access to credit, David Stevens, president and CEO of the Mortgage Bankers Association, said during a webinar last week sponsored by Inside Mortgage Finance. The revised risk-retention/QRM rule jointly released by a handful of federal agencies in August would align...

If the mortgage reform legislation drafted by Sens. Bob Corker, R-TN, and Mark Warner, D-VA, becomes law, the mortgage market would be reconstituted in such a way that the nation’s largest banks could dominate the MBS market, according to the Community Mortgage Lenders of America. The CMLA, which represents small- to mid-sized residential lenders, isn’t entirely enthralled with Fannie Mae and Freddie Mac either, but according to a recent letter sent to the Senate Banking, Housing and Urban Affairs Committee, it fears that “too big to fail” banks could prove an even greater danger. The correspondence notes...

As the partial government shutdown and debt-ceiling crisis completed its second week, the sense of relative urgency for housing finance reform that lawmakers from both parties expressed just a month ago at the five-year anniversary of Fannie Mae’s and Freddie Mac’s conservatorship had taken a back seat to larger, partisan hostilities, say industry observers.In September, Democrat and Republican leadership of the Senate Banking, Housing and Urban Affairs Committee set a goal of finishing committee-level consideration of GSE reform by the end of 2013.

The “public voice” of the Federal Home Loan Bank system is calling on policymakers to remember the 12 regional banks as proposals are considered to restructure the nation’s housing finance system. A recently issued one-page “position paper” by the Council of Federal Home Loan Banks lists a set of nine positions the 12 have collectively adopted to remind official Washington that the system has “operated prudently and served as a mechanism for economic stability” for more than 80 years.

Residential lenders realize that eventually the industry will face lower loan limits for Fannie Mae/Freddie Mac mortgages, but they now hope the day of reckoning won’t come until sometime in the second quarter of 2014. “[The Federal Housing Finance Agency] is still trying to figure out what to do,” said one industry lobbyist who spoke under condition his name not be published. “They never thought they’d face this much resistance.” Industry groups and members of Congress have been besieging the agency with challenges to its authority to lower the limits for the government-sponsored enterprises and pleas to defer any such changes. As reported in the Oct. 4 issue of Inside Mortgage Finance, 13 Senators – including two Republicans – recently wrote...

The Obama administration is working to reform the government-sponsored enterprises but has said little publicly about its efforts for political reasons, according to a former advisor for the administration. As for when Congress might pass GSE reform, predictions range from as soon as next year to sometime after Obama’s presidency, if at all. Speaking at the ABS East conference sponsored by Information Management Network this week in Miami, Jim Parrott, owner of Falling Creek Advisors and a senior advisor at the National Economic Council until earlier this year, said the Obama administration has largely avoided publicly pushing GSE reform since releasing a white paper on the issue in 2011 due to concerns about reactions from Republicans in Congress. “The administration has been quite involved...

Reforms seen in the new era of non-agency jumbo MBS issuance aren’t enough to prompt significant investor participation, according to John Gidman, president of the Association of Institutional Investors. At a hearing this week by the Senate Committee on Banking, Housing and Urban Affairs, Gidman and others called for a number of changes to the non-agency market. “The fundamental structural and process weaknesses for non-agency residential MBS securitization have not been fixed in the current private-label securities market,” Gidman said. “The issuance process itself is very opaque. Ratings continue to be shopped, issuers are still incentivized to water down representations and warranties, and continued variability in structures and documentation make the market more challenging for investors and raise the costs of funding.” He acknowledged...

Non-agency MBS investors are still unhappy with how negotiations for the $25 billion national servicing settlement were handled and are concerned that the federal government will pull a similar move in settlement negotiations with JPMorgan Chase. John Gidman, president of the Association of Institutional Investors, said non-agency MBS investors weren’t involved in negotiations for the national servicing settlement and haven’t been involved in ongoing discussions regarding Chase. He said using funds from non-agency MBS to remedy allegations of inappropriate, unlawful or illegal behavior on behalf of an issuer or servicer makes it harder for investors to price risk. “This consequently makes...

The Department of Housing and Urban Development this week proposed its own “qualified mortgage” rule for FHA-insured mortgage loans that builds off the existing QM rule finalized by the Consumer Financial Protection Bureau earlier this year. The proposed rule aligns with the ability-to-repay criteria in the Truth in Lending Act as required by the Dodd-Frank Act. Once the proposal becomes final and takes effect, it would replace the CFPB’s rule for FHA loans. The DFA has set a seven-year timetable for FHA, the VA and the Rural Housing Service to promulgate their own QM rules. HUD’s proposed QM rule would ...

The Department of Housing and Urban Development’s Mortgagee Review Board has collected $1.9 million from Oct. 1, 2012, through June 30, 2013, from actions taken against FHA lenders. The MRB actions involved 30 lenders, of whom 15 agreed to settle and seven agreed to indemnify HUD for its losses, according to the board’s latest data. The indemnification agreement covered 166 FHA-insured loans, and 11 lenders lost their authority to participate in the FHA single-family mortgage program. Cases heard by the MRB involved infractions, such as failure to implement and maintain a quality control plan and to review early payment default loans, which resulted in ...