After years of on-again, off-again activity behind the scenes while the House of Representatives has repeatedly taken tentative steps toward creating a covered bond marketplace, the Senate finally got into the game with the introduction this week of legislation nearly identical to the bill introduced in the House earlier this year. On Wednesday, a small bipartisan group from the Senate Banking, Housing and Urban Affairs Committee introduced the “United States Covered Bond Act of 2011,” which is designed to create a legislative framework to expand funding options for U.S. financial institutions. Co-sponsors include...

Republican Sen. Bob Corker this week introduced legislation that would wind down Fannie Mae and Freddie Mac in part by limiting their new MBS issuance to a declining share of total new mortgage securitization. The Tennessee lawmaker’s Residential Mortgage Market Privatization and Standardization Act would “responsibly unwind” the government-sponsored enterprises by gradually reducing their portfolios of guaranteed mortgage-related assets while taking steps to bring uniformity and transparency to the housing market so that private capital can begin to replace the GSEs. The Corker bill would annually reduce the...

Industry groups are taking seriously new legislation introduced on Capitol Hill that would impose a tax on all securities trading activity, even if most observers see little likelihood of such “Robin Hood” tax legislation being enacted by a polarized Congress. Sen. Tom Harkin, D-IA, and Rep. Peter DeFazio, D-OR, last week introduced the Wall Street Trading and Speculators Tax Act, which would impose a 3 basis point tax on all non-consumer trading of securities, stocks, bonds, interests in partnerships and trusts, and derivative financial instruments. The tax would not be applied on new issuance or debt with...

Fannie Mae and Freddie Mac lost a combined $9.2 billion during the third quarter – mostly due to writedowns on derivatives transactions – while the two government-sponsored enterprises continued to watch their massive MBS holdings decline. As of the end of September, Fannie and Freddie held a combined $754.54 billion of MBS in their retained portfolios, down 1.1 percent from the second quarter and a decline of 7.4 percent from the same July through September period last year. Fannie’s holdings of non-agency MBS fell 2.2 percent to $77.1 billion during... (Includes one data chart)

Ginnie Mae reiterated its desire to enhance its MBS disclosures by moving towards a Freddie Mac disclosure model, but officials are not providing specifics or a timeline. During a telephone press briefing on the agency’s fiscal year 2011 results this week, Ginnie Mae President Ted Tozer said the plan to move toward loan-level disclosures is still in play and investors are being consulted regularly on the kind of disclosures they would like to get. “We want to make sure we are doing it in a controlled, prescriptive manner and we want the information that we provide to be superior and consistent,” he said. “We are also...

Recent non-agency mortgage loan modifications are showing better results compared to earlier private-label modifications despite a continued slowdown in new modification activity, according to a new Fitch Ratings analysis. While the number of completed modifications dropped, transactions completed in the past 18-24 months have improved slightly over earlier programs as a result of standardized guidelines, the recent Fitch report said. Patterned on the Home Affordable Modification Program, the standardized guidelines helped to focus attention on creating more sustainable modifications. These features included...

The Federal Housing Finance Agency and its wards, Fannie Mae and Freddie Mac, want to change servicer compensation to provide more resources for addressing nonperforming loans and try to reduce consolidation in the market, but MBS analysts remain concerned that fiddling with the current system could derail the to-be-announced market. “A big concern is that the TBA market for mortgages is very fragile,” said Jim Gross, vice president of financial reporting and public policy at the Mortgage Bankers Association. “Making radical changes could further rock the market.” The more radical proposal outlined by the...

Any proposed restrictions on asset-backed securities issuers, real estate investment trusts and other mortgage-related pools under the Investment Company Act would be harmful to the market and further restrict liquidity and capital formation, warned stakeholders. In comments to the Securities and Exchange Commission’s possible amendments to Rule 3a-7 and Section 3(c)(5) of the ICA, most stakeholders noted that the two provisions have worked well through the years to distinguish asset-backed issuers from investment companies, address investor protection concerns and allow the growth and innovation of...

In today’s dramatically changed mortgage lending and regulatory environment, lenders must aggressively manage their originator compensation structures if they want to guarantee their compliance with all applicable laws and regulations, according to a top industry consultant. The first step is “to eliminate all incentive arrangements that pay commissions or bonuses based on any of the terms or conditions of the loans such as interest rates, demand features, prepayment penalties or proxies for these loan terms,” said Henry Oehmann, national executive compensation services executive director for Grant Thornton. Lenders...

Ratings by DBRS of new non-agency mortgage-backed securities will include analysis of several factors at the metropolitan statistical area level. The new rating methodology and loss model were released last week without substantive changes from the proposal the rating service issued in October. “The experience of the last decade has made it apparent that it is not credible to consider loan performance without factoring in house prices and unemployment rates,” DBRS said. ...