Residential mortgage securitization rates declined in the third quarter of 2011, but surging volume in the primary market will push new MBS issuance higher in coming months. A total of $247.5 billion of residential MBS backed by newly originated loans were issued during the third quarter, representing a relatively low 76.1 percent of the supply of new home loans originated by lenders during the period, according to an Inside MBS & ABS analysis. During the third quarter, about 67 percent of single-family mortgages securitized by Fannie Mae were...(Includes one data chart)

As the Securities and Exchange Commission considers updating its oversight of asset-backed securities issuers, such as enhancing investor protections and changing the use of credit rating agencies, major players in the securitization market are split on whether – and how – it should do so. The SEC is considering whether to revise Rule 3a-7, which excludes qualified ABS issuers from being classified as investment companies under the Investment Company Act of 1940. The rule now includes several conditions that refer to credit ratings by nationally recognized statistical...

The Federal Reserve Bank of New York will ask its primary dealers, as part of best practices, to raise their upfront cash collateral for MBS trades. A NY Fed spokesman denied that the change in collateral requirements was a reaction to the recent collapse of MF Global, a primary dealer. Since its last foray into the agency MBS business in 2010, the agency has been considering raising the margin for MBS deals, he said. The spokesman said a best practices guidance issued by the NY Fed’s Treasury Market Practices Group in September 2010 requires trading desks to consider...

Major mortgage servicers are widely expected to agree to principal reduction for some struggling homeowners as part of the price of settling complaints over foreclosure practices brought by state attorneys general. That idea doesn’t sit well with some MBS investors, who are concerned that they will end up paying some of the cost of reducing principal as a way to keep distressed borrowers in their homes. The Association of Mortgage Investors warns that principal reduction of securitized loans would be akin to forcing the middle class to bear the settlement’s burden. In a statement, the AMI warned that principal reductions could...

ABS issuers are scrambling to get a handle on complex new rules to mitigate conflicts of interest in the structured finance market that are being developed by the Securities and Exchange Commission and federal banking regulators. “At the end of the day, we’ll spend lots of time figuring out how to comply,” said Bianca Russo, managing director and associate general counsel at JPMorgan Chase, during a seminar sponsored last week by the American Securitization Forum. “It’s going to be a challenge to comply, however the rules turn out.” Complexity and consistency are...

Legislative proposals for a TBA market backed by non-agency MBS as an alternative to a market driven by government-sponsored enterprises lack precedence and are full of unknowns, according to analysts. “While this is a laudable effort – and a necessary one in order to remove the government’s sup-port from the housing finance market – the extent to which private enterprise will be able to pick up the slack the GSEs leave behind is unknown,” said Benjamin Feldman, a housing policy analyst and advocate. Peter Wallison, an Arthur F. Burns fellow in financial...

Both Fannie Mae and Freddie Mac retained their hefty shares of mortgage-backed securities with something of a bump during the third quarter of 2011, according to a new Inside The GSEs analysis.The GSEs issued a combined $174.8 billion in MBS in the third quarter, a 12.8 percent increase from the second quarter. Compared to the third quarter of 2010, Fannie and Freddie saw an 11.2 percent decrease in MBS issuance during the first nine months of the year.

The Government Accountability Office recently confirmed the view widely held in the mortgage finance industry that federal regulators are not doing enough to analyze the cost and other effects of implementing the Dodd-Frank Act. “Little is known about the actual impact of the final Dodd-Frank Act rules, given the short amount of time the rules have been in effect,” the GAO said. The government watchdog noted that federal financial regulators are required to perform a variety of analyses, but the requirements vary and none of the regulators are...

A proposed Senate bill to steadily wind down Fannie Mae and Freddie Mac over the course of a decade appears to have some support at the Federal Housing Finance Agency, where the acting director is eager for Congress to move toward resolving the three-year-old conservatorships of the two government-sponsored enterprises. S. 1834, the Residential Mortgage Market Privatization and Standardization Act of 2011 would gradually reduce the two GSEs over 10 years through an unusual mechanism. Instead of guaranteeing the entire MBS trust as they...

Freddie Mac this week announced a new class of single-family MBS backed by mortgages previously repurchased from MBS because they were in serious delinquency. Both government-sponsored enterprises began aggressively buying seriously delinquent loans out of their MBS trusts at the beginning of 2010 because new accounting rules required them to consolidate all their outstanding MBS on their balance sheets. Buying the distressed loans out of the MBS trusts had no impact on their financial accounting, but it allowed them to better manage...