Fannie Mae and Freddie Mac have reduced their dependency on U.S. government support, but there may be restructuring issues within the budget talks to resolve the looming “fiscal cliff,” according to Fitch Ratings. Fitch this week affirmed its “AAA” rating for both Fannie and Freddie even as its outlook for the two GSEs remains “negative.” However, the rating agency warned that its outlook for Fannie and Freddie depends upon the economy and the ability of political leaders to come to an accord on taxes and government spending before year’s end.

Both Fannie Mae and Freddie Mac retained their dominant shares of mortgage-backed securities with a bit of a boost during the third quarter of 2012, according to an Inside The GSEs analysis.The two GSEs issued a combined $335.4 billion MBS during the third quarter, compared to $273.9 billion during the previous quarter. Fannie and Freddie saw an ample 54.7 percent increase in MBS issuance during the first nine months of 2012 compared to the same period a year earlier.

Valuation of mortgage servicing rights has been challenging for many market participants, particularly with the incredible pace of change occurring in the mortgage servicing industry. Hence, it is important for servicers to have the basic building blocks to a solid MSR valuation process and a full understanding of the company for pricing and valuation purposes, suggests a recent study from PricewaterhouseCoopers. PwC noted that MSR valuations for seasoned portfolios have dropped ...

While the nine rating services registered as Nationally Recognized Statistical Rating Organizations were largely compliant with Securities and Exchange Commission regulations and recommendations, the agency found some significant issues with the ABS rating process. In a review covering the government’s 2012 fiscal year ending in September, the SEC said one of the top three firms appeared to change its method for calculating a key financial ratio in rating certain asset-backed securitizations, but failed for several months to publicly disclose the change and its effects on the ratings. The agency includes non-mortgage ABS, commercial MBS and non-agency MBS in a single category of asset-backed securitizations. “Further, it appears the NRSRO did not consistently apply...

The top three rating services continued to dominate the new issuance market in non-mortgage ABS during the first nine months of 2012, according to a new Inside MBS & ABS analysis, but the biggest player in the non-agency MBS market was DBRS. Moody’s Investors Service rated 69.7 percent of the non-mortgage ABS issued in 2012 as of the end of the third quarter, down slightly from its 70.4 percent share of the 2011 market. The company’s strengths were in vehicle finance and business loan ABS, where it captured more than three-quarters of new issuance by dollar volume. Standard & Poor’s ranked...[Includes two data charts]

Securitization market professionals are jointly promoting the practice of “margining” transactions involving Fannie Mae, Freddie Mac and Ginnie Mae MBS, despite the costs involved, to reduce counterparty and systemic risks. Last week, the Treasury Market Practices Group revised its existing “best practices” for Treasury, agency debt and agency MBS markets to include a recommendation that forward-settling agency MBS transactions be margined in order to prudently manage counterparty exposures. “In order to allow market participants to develop...

Redwood Trust issued a $301.46 million non-agency jumbo mortgage-backed security last week with the shortest seasoning period yet on the real estate investment trust’s post-crisis issuance. Loans included in the MBS were seasoned an average of 1.1 months due to Redwood’s increased loan purchase activity. Average loan seasoning on the eight other non-agency jumbo MBS deals issued by Redwood since 2010 has varied from 8.6 months on a deal in 2011 to 1.9 months on the deal Redwood issued in October ...

Members of the Residential Mortgage-Backed Securities Working Group filed a lawsuit this week against Credit Suisse Securities and reached separate settlements last week with JPMorgan Securities and Credit Suisse. New York Attorney General Eric Schneiderman, a co-chair of the working group, said federal and state regulators are working on a number of other actions. “We’re a long way away from wrapping this up,” he said. The lawsuit against Credit Suisse was filed this week by Schneiderman, alleging that ...

JPMorgan Securities and Credit Suisse Securities have agreed to pay more than $400 million combined to settle government charges that they misled investors in offerings of non-agency MBS from 2005 to 2010, according to the Securities and Exchange Commission. The SEC, working with the federal-state Residential MBS Working Group, reached separate settlement agreements with the two financial institutions after filing a complaint and issuing a cease-and-desist order. Neither JPMorgan nor Credit Suisse admitted to or denied the findings against them or any of their affiliates. The SEC alleged...