The securitization market requires less of a heavy handed approach from government and a softer touch in order to restore investor confidence and lure private capital back into the market, industry executives told senators on Capitol Hill this week. Witnesses testifying before the Senate Banking Subcommittee on Securities, Insurance and Investment said the state of the securitization market is uncertain, due to government subsidies crowding out budding private sector resurgence, as well as an overly broad, but ambiguous, interpretation of the Dodd-Frank Act by regulators. "The consequences of failing to attract sufficient private-sector capital to...

Everyone seems eager to see the private sector re-enter the MBS market, but it simply isn't ready or willing, and won't be for a very, very long time, according to experts in an American Securitization Forum seminar held this week. "From our perspective as an investor, one of the things that you really have to think about when you look at the mortgage market is what investors, big institutional investors, are interested in purchasing. The biggest thing in our mind is liquidity," said Nancy Handal, a managing director at Metropolitan Life Insurance Company. "We learned a ton as investors from the crisis in 2008," she continued...

Effective July 1, reporting of tax information to investors of Ginnie Mae securities will move from e-Access to the Ginnie Mae Enterprise-Wide Portal (GMEP), which now serves as the single access point for all of the agency's online business applications. The e-Access function for uploading quarterly widely held fixed investment trust (WHFIT) reporting files for investors would no longer ...

New due-diligence rules will likely result in increased costs for issuers of non-agency mortgage-backed securities and increased disclosures for investors. Due diligence firms are also divided on whether to assume the "expert liability" required by the Securities and Exchange Commission regarding due diligence performed on MBS. Vicki Beal, a senior vice president at Clayton Holdings, said Clayton – a leading MBS due diligence provider – would likely be willing to take on the expert liability requirements. However, she said Clayton’s assumption of the liability would require MBS issuers to pay more for Clayton's services. The SEC issued...

Industry participants warn that federal regulators' recently proposed definition for qualified residential mortgages is too stringent and will unnecessarily limit lending to prime jumbo borrowers. If the rule is adopted as proposed, many warn that issuance of non-agency mortgage-backed securities will be limited or non-existent. "While the rules do a good job of addressing and deterring abuses of subprime securitization structures, they are overly and unnecessarily harsh when applied to prime securitization structures," said Martin Hughes, president and CEO of Redwood Trust. Chris Flanagan, a managing director at Bank of America Merrill Lynch, added that...

Lawmakers on a House subcommittee last week approved by a wide bipartisan margin a bill that would create a legislative framework for a covered bond market in the U.S. and, some critics contend, an unnecessary competitor to the Federal Home Loan Bank system.

Officials at Redwood Trust, the real estate investment trust that made headlines last year by sponsoring the first non-agency securitization of newly originated mortgages since the financial crisis began in 2008, have a favorable outlook on the residential market – yet the biggest challenge right now remains the low volume of production. Redwood Trust is upbeat about the future, for a number of reasons, according to Brett Nicholas, executive vice president and chief investment officer. "Proposals to reform the government-sponsored enterprises issued in February 2011 call for phasing out Fannie Mae and Freddie Mac," he said during...

U.S. banks are generally more liquid than Basel III liquidity standards would suggest thanks in large part to the treatment of banks' large portfolios of GSE-related securities, according to Fitch Ratings.

The so-called RMBS 2.0 features squeaky-clean collateral and high-definition transparency, but industry experts say, more importantly, that after years of mostly talk there is now some momentum in the market. Adam Yarnold, a managing director at Barclays Capital, said there are half a dozen residential mortgage conduits – including his firm – that are buying loans. During a panel session at the secondary market conference sponsored by the Mortgage Bankers Association, he noted that more broker/dealers are in the wings. Barclays is buying high-quality loans with loan-to-value ratios below 70 percent and debt-to-income ratios that come close to the standards proposed by federal regulators for qualified residential mortgages, Yarnold said. The company hosts a web-based portal through which it locks loans and...

Both Fannie Mae and Freddie Mac continued to shrink their mortgage portfolios as required by government regulators during the first quarter of 2011 even as the two government-sponsored enterprises posted dramatically different earnings reports for the first three months of the year. Under the terms of the purchase agreement with the Treasury Department and under Federal Housing Finance Agency regulation, both Fannie and Freddie’s mortgage-related investments portfolio are subject to a cap that decreases by 10 percent each year until each portfolio reaches $250 billion. By Dec. 31, 2011, neither company will be able to hold an unpaid principal balance for mortgage-related investments that exceeds $729 billion. “FHFA has stated that we will not be a substantial buyer or seller of mortgages for... [Includes one data chart]