Wall Street is concerned that the further away a loan is from getting safe harbor protection as a qualified mortgage, the more legal uncertainty and higher costs there will be associated with it.
With the Federal Housing Finance Agency working on a common securitization platform for Fannie Mae and Freddie Mac, market participants are beginning to ask whether the residential finance sector really needs two government-sponsored enterprises. This week, at a policy forum in Washington, MBS co-inventor Lewis Ranieri and former GSE regulator James Lockhart suggested that the industry doesn’t need both Fannie and Freddie. The thinking is that a common securitization platform will facilitate the transition to a standardized GSE MBS, with slight variations, that would eliminate the current pricing differentials between Fannie and Freddie MBS. Speaking at the Bipartisan Policy Center, Lockhart noted...
Representatives of the structured finance industry are worried about the effect the Consumer Financial Protection Bureau’s ability-to-repay/qualified-mortgage rule will have on the revival of the non-agency MBS sector. One of their main concerns right now is that the further away a loan is from getting safe harbor protection as a qualified mortgage, the more legal uncertainty and higher costs there will be associated with it. Last week, analysts at Morningstar Credit Ratings LLC noted that the rule will allow a borrower in the first three years of the mortgage to bring legal action challenging whether the lender determined an ability to repay. If successful, the borrower can be entitled to up to three years of fees and finance charges, actual damages, and legal fees and costs, they said. Additionally, the borrower will be able...
Fed Chairman Ben Bernanke indicated that the central bank is leaning toward scaling down its MBS purchases later this year, and that rapidly rising mortgage interest rates don’t pose a major threat to the fledgling housing recovery.
Looser underwriting standards and concerns about the financial strength and limited operational history of Shellpoint Partners pushed the credit enhancement on the issuer’s pending non-agency MBS to levels not previously seen in the new wave of non-agency MBS issuance. Shellpoint is preparing a $261.58 million non-agency jumbo MBS, according to presale reports released this week. The deal is set to receive a AAA rating with credit enhancement of 10.10 percent on the top-rated tranche. AAA credit enhancement levels on recent deals from Redwood Trust and JPMorgan Chase have ranged...
Private MBS investors will likely see reduced competition from the Federal Reserve later this year if the central bank begins to slow down its purchases of agency MBS, but there is also likely to be a sharp drop in new MBS supply at the same time. The Federal Open Market Committee made no changes in its policy of adding $40 billion a month to its massive $1.165 trillion portfolio of agency MBS, in addition to reinvesting payments from its agency debt and MBS holdings. It also promised to closely monitor economic and financial developments and stands prepared to increase or decrease its MBS purchases. But Fed Chairman Ben Bernanke later indicated...[Includes two data charts]
The amount of home mortgage debt outstanding continued its post-crisis downward spiral in the early months of 2013, although the agency servicing market grew slightly, according to a new analysis and ranking by Inside Mortgage Finance. The Federal Reserve reported total home mortgage debt outstanding of $9.868 trillion as of the end of March, down 0.6 percent from the previous quarter. Under pressure from falling house prices and the collapse of the non-agency market, the supply of MDO has been in steady decline since peaking at its all-time high of $11.195 trillion at the end of 2007. Single-family servicing associated...[Includes two data charts]
Investors have significantly reduced their home-purchase activity in recent months, according to the latest Campbell/Inside Mortgage Finance HousingPulse Tracking Survey. Current homeowners and first-time homebuyers have filled the void and are much more likely to finance a home purchase with a mortgage compared to investors. Investors accounted for 20.2 percent of home purchases in May, based on the three-month moving average, the third consecutive decline in investor share. Market share for both current homeowners and first-time homebuyers increased in recent months, with current homeowners accounting for 43.8 percent of home purchases in May. The trends present...
Some industry experts say mortgage executives will not feel safe about originating – or securitizing – more than a miniscule amount of non-agency loans until the government stops taking “retribution” against the housing finance industry for the sins of the housing bust. Lewis Ranieri, who helped launched the mortgage-backed security business, said the biggest victims of the mortgage crisis are minority borrowers and young workers who no longer qualify for credit because of tight underwriting guidelines promulgated by Fannie Mae and Freddie Mac since they went into conservatorship back in September 2008. But tight underwriting isn’t the sole problem, Ranieri argued...
RSS