The volume of residential MBS in the market fell again in the fourth quarter of 2011, sustaining a nearly constant decline that’s been underway since the midway point in 2009. A total of $6.437 trillion single-family MBS were outstanding as of the end of last year, down 1.7 percent from the third quarter. The last time there was growth in the supply of MBS was in the second quarter of last year. The major factor is the ongoing decline in the supply of home mortgages, which fell 0.5 percent in the fourth quarter and 2.2 percent over the full year in 2011. Mortgage collateral has... (Includes one data chart)

The documents governing a proposed $25.0 billion settlement involving five major banks include greater incentives for principal reduction loan modifications on portfolio loans rather than loans in non-agency mortgage-backed securities. However, non-agency MBS investors remain concerned that they could take losses due to the settlement. The consent judgments against Ally Financial, Bank of America, Citigroup, JPMorgan Chase and Wells Fargo were filed in federal court this week, a month after the settlement was announced by 49 state attorneys general and the federal government ...

Beginning June 1, the non-agency portion of the Home Affordable Modification Program will include a “Tier 2” with expanded eligibility requirements and adjusted incentives. The Treasury Department released the details last week, officially making changes first announced in January. The changes to HAMP include eligibility for certain rental properties, less stringent debt-to-income ratio requirements, a loosening of the short sale and deed-in-lieu of foreclosure requirements and an extension of all HAMP programs through the end of 2013. HAMP was initially scheduled to expire at the end of this year ...

Nationstar Mortgage announced last week that it plans to acquire the $63.0 billion mortgage portfolio and certain other assets from Aurora Bank, a subsidiary of Lehman Brothers. The acquisition includes co-investment by a real estate investment trust affiliated with the owner of Nationstar and continues Nationstar’s rapid nonprime servicing growth. The high-touch servicer said it expects the long-pending sale by the bankrupt Lehman to close during the second quarter of 2012. A number of other servicers had expressed interest in bidding on the Aurora portfolio, including Ocwen Financial ...

The Securities and Exchange Commission this week filed a lawsuit against three former executives of Thornburg Mortgage regarding disclosure and accounting issues in early 2008. The former executives of the now bankrupt jumbo lender denied the charges and vowed to prevail in court. “Thornburg’s executives schemed to drop a disingenuous annual report into the public realm at the most opportune moment possible while knowing it was merely the calm before the next storm,” said Donald Hoerl, director of the SEC’s Denver regional office. Larry Goldstone and Clay Simmons, the former CEO and chief financial officer of Thornburg, respectively, countered that ...

Ginnie Mae will question certain mortgage-backed securities issuers about reporting inconsistencies in pool data submissions over the last couple of months and try to resolve those issues to avoid delay in MBS pool processing. In an audio conference with issuers last week, Ginnie Mae officials said agency staff discovered the flawed data submissions while poring over several months’ worth of pool data submitted by issuers. While most of the information fell within theVargas said the discrepancies were attributed to a small group of issuers, who will be contacted soon to work on corrections before Ginnie Mae puts stronger edits up front. She said the agency wants to ...

A Fannie Mae proposal to reduce the cost of lender-placed homeowner insurance might be great news for borrowers but not for insurance companies that underwrite the product, warned Moody’s Investors Service. While Fannie has not disclosed the full details of its cost-reduction proposal, the government-sponsored enterprise plans to place policies directly with insurance companies, rather than accept policies put in place by the mortgage lender. Last week, the GSE issued a “request for proposals” inviting insurance companies to compete for the GSE’s lender-placed business. The request is...

New issuance of agency MBS rose a modest 2.2 percent from January to February, and 2012 has started off on a somewhat stronger note than many observers had expected. Fannie Mae, Freddie Mac and Ginnie Mae issued a total of $116.5 billion of new single-family MBS last month – which made February the second-highest month in production since the beginning of last year. While issuance in the first two months of 2012 was down 5.6 percent from the same period in 2011, total production for this year would top $1.38 trillion at the current pace and that would be a measureable gain over...(Includes two data charts)

The House Ways and Means Committee this week extended until March 30, 2012, the period of time in which it can consider legislation that would lay the legal and regulatory foundation for a covered bonds market in the U.S. H.R. 940, the United States Covered Bond Act of 2011, was introduced March 8, 2011, by Rep. Scott Garrett, R-NJ, and reported out of the House Financial Services Committee on June 22, then referred to Ways and Means for consideration of its potential effect on the federal budget. Late last month, the Congressional Budget Office issued a cost estimate of the legislation. “CBO...

Principal reductions hold the potential for a positive impact on the mortgage market by preventing some foreclosures, but residential MBS investors stand to lose from an improperly implemented, wide-ranging loan modification effort, according to Fitch Ratings. The mandated principal reduction provisions in the recent $25 billion settlement involving state attorneys general, the federal government and the five largest mortgage servicers appear to be a “sensible approach” as loan modifications with principal reductions have performed better than other types of mods, but Fitch noted the benefit comes with a...