New regulations are re-shaping the non-agency MBS market, but economic issues, the ratings process and shifting investor appetite may have more to do with the stalled recovery in the sector, experts said during the American Securitization Forum conference last week in Las Vegas. John Arnholz, a partner at Bingham McCutchen LLP, suggested that the regulators will end up issuing a new proposed rule on risk retention, given the widespread opposition to the original proposal. The proposed premium capture recovery fund idea “came out of nowhere,” he said, adding that there is a good deal of dissent among the six...

The mortgage industry is skeptical about President Obama’s proposal for low-cost, non-agency loan refinancing program, administered by the FHA for current, underwater borrowers. Some industry participants called the plan nothing but smoke and mirrors that would likely create unrealistic expectations. But deceptive or not, the proposal first announced by the president in his State of the Union address promises to be different from the earlier, huge unsuccessful FHA experiments in foreclosure prevention – Hope for Homeowners and FHA Short Refinance programs. The proposed refi plan is a combination of ...

President Obama this week called on Congress to enact legislation to refinance non-agency borrowers through the FHA, to be paid for by large financial institutions, and to force Fannie Mae and Freddie Mac to be more accommodating. Most observers say the proposals stand little or no chance in the bitterly divided Congress, and that they might have little more success than earlier FHA refi programs for non-FHA borrowers. Under the latest proposal, borrowers with conforming-balance loans not financed by the government-sponsored enterprises would be able to get refi loans from the FHA. To be eligible, the...

The six federal agencies that have to respond to massive protests over a proposed qualified residential mortgage definition have offered little guidance on their next step, one that industry groups say is critical given its interaction with a separate rule that sets standards for qualified mortgages that show the borrower has the ability to repay a loan. “We will probably see a QM rule before a QRM rule,” said Joseph Pigg, senior counsel at the American Bankers Association. “Getting six regulatory agencies to agree will make QRM a longer process,” he noted. The QM/ability-to-repay rule is under...

Fannie Mae and Freddie Mac would be brought “on budget” by adding the two government-sponsored enterprises’ outstanding obligations to the federal deficit, while also mandating the use of “fair value” accounting for the FHA to take into account risk as well as borrowing costs, under legislation sponsored by a high-ranking House Republican. Last week, the House Budget Committee passed H.R. 3581, the Budget and Accounting Transparency Act of 2012, introduced by Rep. Scott Garrett, R-NJ, as part of a comprehensive package of 10 reform bills by House GOP members who are pushing to enforce spending...

A group of six real estate finance trade organizations has called upon the Department of Housing and Urban Development to hold off on implementing a proposed rule on the “discriminatory effects standard” of the Fair Housing Act until the U.S. Supreme Court can weigh in on the issue this spring. The American Bankers Association, American Financial Services Association, Consumer Bankers Association, Consumer Mortgage Coalition, Independent Community Bankers of America and Mortgage Bankers Association asked HUD to postpone its rulemaking process to establish uniform standards for discrimination under the...

Expect the run up to the fall elections to curb any meaningful results in terms of a legislative overhaul of Fannie Mae and Freddie Mac. However, industry insiders say it’s quite likely that lawmakers will work through the year to tweak various GSE reform proposals for the next Congress to take up in 2013.As Congress resumed this week following the holiday break, members returned to some 14 bills in the House advancing their way through committee – though only a couple are considered “comprehensive” reform legislation. Meanwhile, two bills filed at the end of last year in the Senate got the other chamber of Congress into the GSE reform debate after a long dormancy.

A trio of real estate finance trade groups is calling upon Congress to leave the GSEs’ guarantee fees alone as lawmakers devise a way to pay for tax cuts for the remainder of 2012.The Mortgage Bankers Association, National Association of Realtors and National Association of Home Builders dispatched a joint letter to House and Senate leaders late this week noting their united opposition “to increasing g-fees for reasons other than minimizing the GSE’s risk exposure.” Late last month, the Federal Housing Finance Agency directed Fannie Mae and Freddie Mac to increase g-fees on new mortgage products by 10 basis points starting April 1.

No matter which political party controls the House during next year’s 113th Congress, there will be a new House Financial Services Committee chairman in charge of setting the agenda as both the current chair and the ranking member are vacating their positions at the end of 2012.Rep. Spencer Bachus, R-AL, said this week he will observe the House’s six-year term limit rule for chairmen and ranking members and not seek a waiver with the House Republican Conference. On Nov. 28, Rep. Barney Frank, D-MA, the committee’s one-time chairman and current ranking member announced he would retire from Congress at the end of his present term. Bachus, who was elected to the House in 1992, is seeking re-election this fall.

Securitization experts are expecting a rerun of last year in 2012, as the U.S. economy slowly rights itself and most segments of the asset-backed securities market generate reasonable new issuance and stable performance. While observers suggest the housing market may make only modest improvement this year, no one expects much non-agency mortgage activity. Growth in issuance of non-agency mortgage-backed securities is going to be very slow, said Ron Mass, co-head of structured products at Western Asset Management Co. Because the market is underwriting the mortgage borrower, and no longer relying...