Market experts and participants are uncertain as to just how capable the private sector is to step in and replace Fannie Mae and Freddie Mac, as legislative initiatives to deal with the government-sponsored enterprises and reform the non-agency MBS market gain some momentum in Congress. “I think the problem so far has been the fear that the flow of credit would dry up if we try to extract the government from the mortgage finance system. With $5 trillion in GSE/agency debt out there, it’s a compelling fear,” said Ralph Daloisio, a managing director of the New York-based structured finance group of...

While Federal Housing Finance Agency Acting Director Edward DeMarco has been steadfast in his refusal to consider principal reductions for Fannie Mae and Freddie Mac loans, there are indications he may allow a new principal paydown proposal. Many consumer protection groups and regulators argue that principal reductions will protect, instead of degrade, taxpayers’ investment in the government-sponsored enterprises. Principal reduction can help revive a housing market that continues to be stressed by declining house prices and weak economic fundamentals, they say. Principal reductions have taken...

Bank of America and other large mortgage servicers are seeking a meeting with the Federal Housing Finance Agency to address concerns about the latest version of the Home Affordable Refinance Program for underwater Fannie Mae and Freddie Mac borrowers. Since HARP was first launched in 2009, it has failed to meet expectations. The government quickly expanded the program to include loans with current loan-to-value ratios of up to 125 percent, which accounted for a very small share of business. Under HARP 2.0, which went into effect this month but won’t be fully up to speed until the second quarter of...

Reform of the government-sponsored enterprises is seen as an essential step toward the widespread resumption of non-agency securitization. However, industry analysts suggest that significant action on GSE reform will not begin until after the November 2012 elections. “We are still nowhere close to any legislation that has a realistic possibility of even being enacted,” said Lawrence White, a professor of economics at New York University, at a seminar this week hosted by the American Securitization Forum. “The can will continue to get kicked down the road until after November 2012.” ...

Federal regulators have offered few clues on what is next for proposed qualified residential mortgage regulations, and the uncertainty in the marketplace has been cited as an impediment to the resumption of non-agency securitization. “The agencies are carefully evaluating all of the comments received and are now actively engaged in considering the many issues raised as we determine how best to proceed with the risk-retention rulemaking,” Acting Comptroller of the Currency John Walsh said last week. The extended comment period on the proposed rule closed in August ...

The Treasury Department increased its threats against non-agency servicers regarding Home Affordable Modification Program performance. In a report released last week, the Treasury was highly critical of JPMorgan Chase and a number of other non-agency servicers remain on notice. Freddie Mac, acting as the Treasury’s compliance agent for the Making Home Affordable program, conducts quarterly assessments of HAMP servicers. In the third quarter of 2011, Chase was deemed to be in need of “substantial improvement” in compliance with MHA guidelines, the third quarter in a row for the servicer ...

Ginnie Mae may have reported potentially inaccurate data to Congress about its exposures because estimates were not based on the best available data, according to a recent report by the Government Accountability Office. The agency’s sensitivity analysis also ignored important data, which could affect the accuracy of its cash-flow forecasts, the report said. Although Ginnie Mae has revised its cash-flow forecast model, it has not implemented practices identified in Federal Accounting Standards Advisory Board guidance and risk-budgeting guidance, the report noted. By ignoring such practices, Ginnie Mae’s model may not be ...

Ginnie Mae recently announced changes to rules implementing provisions under the Servicemembers’ Civil Relief Act for reimbursing excess mortgage interest to Ginnie Mae issuers. Under the revised SCRA reimbursement policy, issuers will be reimbursed excess interest payments on SCRA mortgage loans based on two different dates for reservists and active members of the military, said Ginnie Mae officials during an issuer outreach webinar on Dec. 8. If the borrower is a reservist, the reimbursement will be based on the date of the receipt of the deployment letter and reimbursements for active members will be based on the deployment date. Under the SCRA, mortgage lenders are required to ...

Total FHA endorsements declined 4.2 percent in October from the previous month and 29.7 percent from a year ago even as FHA refinances continued to slow, according to an Inside FHA Lending analysis of FHA data. A total of 88,060 mortgages were endorsed for FHA insurance in October, down from 91,963 loans in September. Of the October endorsements, 60,596 were purchase loans, down 9.0 percent from the previous month and 7.9 percent from the same reporting period last year. FHA refinancing increased 15.4 percent on a month-to-month basis but declined a whopping 57.9 percent from last year. Streamlined FHA refis were ... (Comes with one chart)

Republican lawmakers on both sides of Capitol Hill are pushing harder for secondary mortgage market reform legislation as the first session of the 112th Congress moves toward a holiday break. The House Financial Services Subcommittee on Capital Markets and the Government Sponsored Enterprises this week approved legislation aimed at boosting the non-agency mortgage securities market by creating an extensive federal regulatory framework. The bill, approved on a party line vote, does not address the fate of Fannie Mae and Freddie Mac, nor does it provide for any federal backing for...