Industry trade groups this week stepped up their efforts to block the imposition of additional fees on Fannie Mae and Freddie Mac MBS as a way for the government to pay for an extension of the payroll tax holiday and unemployment benefits. Late this week, the House-Senate conference committee announced it reached an agreement on a $150 billion extension through the end of 2012, although final details of the deal were not yet finalized as Inside MBS & ABS went to press. Lawmakers had been considering raising $4 billion of new revenue from increased guarantee fees from the two government-sponsored...

Reaction among non-agency participants regarding the settlement by five large bank servicers announced last week has been mixed. Investors are divided on what impact principal forgiveness loan modifications will have on non-agency mortgage-backed securities – largely because the settlement terms have not been settled yet. “Once the bank modifies their own portfolio loans, where it makes sense to reduce principal, there is a huge incentive to do the rest of the modifications using investor money,” warned Amherst Securities Group. “This stems from the fact that the servicers are able to use investor funds to satisfy their own claims. And the conflicts of interest are exacerbated because of the second liens ...

With prices relatively low, vintage non-agency mortgage-backed securities have been a hot item in recent weeks. Some analysts suggest that the buying boom has already peaked and the collateral is overpriced again, though a significant amount of non-agency MBS is still available for sale. “The non-agency market has rebounded in 2012 after a poor second half of 2011,” according to analysts at Bank of America Merrill Lynch. The Federal Reserve’s two sales in as many months of Maiden Lane assets are as good an indicator as any that investor demand for non-agency MBS is strong ...

Non-agency market participants and stock investors appear to be optimistic about the prospects for real estate investment trusts. REITs are positioned to absorb a portion of the agency share of mortgage origination activity, and investor interest in REIT stocks has increased recently. “REITs should definitely take a big part of the agency footprint,” said Michael Commaroto, president and CEO of Apollo Residential Mortgage, a hybrid REIT. Such REITs invest in both agency MBS and non-agency MBS, with agency MBS generally accounting for most of the investing portfolio ...

After making a splash with plans to issue a non-agency mortgage-backed security in 2011, officials at Two Harbors Investment have backed away from a potential new issuance, instead focusing on investing in vintage non-agency MBS. “We don’t want to do a securitization simply to do a securitization,” said Tom Siering, president and CEO of Two Harbors. “It simply must be good for shareholders.” During an investor presentation last week, Siering said returns on investments in non-agency MBS in recent months have been much greater than the returns the real estate investment trust would see from issuing its own non-agency MBS ...

PennyMac Mortgage Investment Trust is gradually ramping up its non-agency jumbo correspondent activity, with plans to expand even further in the coming years. “As the markets develop, one area that will become an increasing focus for PennyMac is non-agency jumbo loans,” said Stanford Kurland, chairman and CEO of the real estate investment trust. PennyMac had $15.0 million in jumbo correspondent originations in the fourth quarter of 2011, up slightly from $13.0 million the previous quarter and $7.0 million in the second quarter of 2011 ...

American Home Mortgage Servicing and Carrington Capital Management agreed last week to settle a lawsuit regarding alleged improper servicing by American Home on $128.1 million in non-agency mortgage-backed securities owned by Carrington. The lawsuit was filed in 2009 by Carrington, which claimed American Home had conducted “fire sales” of delinquent properties in the securities in an effort to repay debt. At the time, American Home denied the charges. The terms of the settlement were not released. [Includes two briefs]

Excluding streamlined FHA refinancing from the “Compare Ratio” loan review process to facilitate refinancing of underwater non-agency mortgages, as proposed by the Obama administration, would make sense. At the margin, however, the proposal would increase Ginnie Mae prepayment speeds on higher-coupon borrowers, analysts cautioned. The proposal is part of a broader administration plan for housing recovery, which calls on Congress to provide non-agency borrowers with access to low-cost refinancing through FHA, and fully streamlined refinancing for borrowers with Fannie Mae or Freddie Mac loans. Underwater borrowers who opt for streamlined refinancing in either agency or non-agency programs would have ... [one data chart]

Ginnie Mae is requesting additional funding in FY 2013 to hire more professionals to help manage the more than $1.2 trillion in outstanding guaranteed mortgage securities it holds and the increasing inherent risks associated with the MBS. Under its budget proposal, the agency is seeking an appropriation of $21 million for staff salaries and expenses in 2013, up from $19.5 million in 2012 and $11.07 million in 2011. The requested staffing increase would ensure improvement in managing areas where Ginnie Mae has the greatest risk exposure, including counterparty risk and defaulted portfolio management, according to the agency. Over the past few years, Ginnie Mae’s market share rose ...

Fannie Mae and Freddie Mac’s debt issuance would be accounted for in the calculation of the federal debt under legislation passed by House Republicans this week.Members approved H.R. 3581, the Budget and Accounting Transparency Act of 2012, sponsored by Rep. Scott Garrett, R-NJ, by a 239 to 181 vote. Garrett’s bill is part of a comprehensive package of 10 reform bills House GOP members are pushing to enforce spending controls and oversight of federal spending.“Off-budget liabilities such as government-sponsored enterprises Fannie Mae and Freddie Mac threaten any progress we make towards deficit and debt reduction,” said Garrett, who is vice chairman of the Budget Committee, as well as chairman of the House Financial Services Subcommittee on Capital Markets and Government-Sponsored Enterprises.