Fannie Mae and Freddie Mac cannot remain safely in conservatorship indefinitely, and they cannot get out from under Uncle Sam’s protection without “cataclysmic” consequences to the government-sponsored enterprises, MBS investors and the market, according to a new Urban Institute study. While the Federal Housing Finance Agency and the White House can make minor changes administratively, the UI paper notes it would take an act of Congress to authorize substantial revisions to the GSEs’ bailout agreement. “They can take...

Building the new common securitization platform for Fannie Mae and Freddie Mac may be the easy part. Plugging in the two government-sponsored enterprises is another story. Through the end of last year, the two GSEs had spent about $65 million to build the CSP, according to a report by the Inspector General of the Federal Housing Finance Agency. The IG estimated that Fannie and Freddie this year are spending about $6 million a month to continue that work. In fact, neither the GSEs nor the FHFA have yet come up...

RBS Securities – which is 64 percent owned by the government of the United Kingdom – is shaking up its mortgage trading operation in the U.S., cutting staff and taking a close look at its future in an extremely tough American mortgage market. Officials at the bank’s MBS headquarters in Stamford, CT, did not return telephone calls about the matter, but several lenders and Wall Street executives confirmed that cutbacks have been made at the company over the past week or so. Frank Skibo, a managing director for RBS in Connecticut, and Ara Balabanian, a director in the group, also could not be reached...

There seems to be a growing trend of foreign banks rethinking their position in the U.S. mortgage market.

Commercial banks and savings institutions held $1.521 trillion of single-family MBS in their retained portfolios as of the end of the first quarter of 2014, according to a new Inside MBS & ABS ranking and analysis of call report data. Bank and thrift MBS holdings were up a modest 1.0 percent from the previous quarter, but it marked the first increase since the third quarter of 2012, when the Federal Reserve began aggressively buying agency MBS and Treasury securities. Significantly, the increase in bank MBS holdings came at a time when new issuance was plummeting. MBS purchases...[Includes two data charts]

In order for the GSEs to exit conservatorship with the full faith and credit of the U.S., they would have to pay the Treasury a fee equal to the value of the government’s backing under the terms of their preferred stock purchase agreements.

Fannie Mae has traditionally reserved the right to invoke margin calls if it needs to.

Bank and thrift MBS holdings were up a modest 1.0 percent from the previous quarter, but it marked the first increase since the third quarter of 2012, when the Federal Reserve began aggressively buying agency MBS and Treasury securities.

New margin rules for broker-dealers may trip up mortgage bankers using mortgage-backed securities to hedge their businesses, according to experts discussing various liquidity issues during last week’s Secondary Market Conference sponsored by the Mortgage Bankers Association. Fannie Mae has traditionally reserved the right to invoke margin calls if the government-sponsored enterprise needed to, even before the Treasury Practices Market Group issued new best practices on the subject, said Renee Schultz, a Fannie vice president, but this right was rarely used. When the TPMG recommendation came out, it appeared to be aimed at systemic risk. But since it was addressed to all broker-dealers, Fannie adopted it. Fannie has implemented...

All the major mortgage product categories saw declines in new originations during the first quarter, but the jumbo and home-equity sectors held up slightly better, according to a new ranking and analysis by Inside Mortgage Finance. The conventional-conforming sector took the biggest hit, as new production dropped 25.9 percent from the fourth quarter of 2013 to an estimated $123 billion in the first three months of this year. The vast majority of these loans still end up being financed by Fannie Mae and Freddie Mac, and the two government-sponsored enterprises continue to draw a lot of their business from the ebbing refinance market. Fannie and Freddie securitized...[Includes two data charts]