A Fannie Mae proposal to reduce the cost of lender-placed homeowner insurance might be great news for borrowers but not for insurance companies that underwrite the product, warned Moody’s Investors Service. While Fannie has not disclosed the full details of its cost-reduction proposal, the government-sponsored enterprise plans to place policies directly with insurance companies, rather than accept policies put in place by the mortgage lender. Last week, the GSE issued a “request for proposals” inviting insurance companies to compete for the GSE’s lender-placed business. The request is...

New issuance of agency MBS rose a modest 2.2 percent from January to February, and 2012 has started off on a somewhat stronger note than many observers had expected. Fannie Mae, Freddie Mac and Ginnie Mae issued a total of $116.5 billion of new single-family MBS last month – which made February the second-highest month in production since the beginning of last year. While issuance in the first two months of 2012 was down 5.6 percent from the same period in 2011, total production for this year would top $1.38 trillion at the current pace and that would be a measureable gain over...(Includes two data charts)

The House Ways and Means Committee this week extended until March 30, 2012, the period of time in which it can consider legislation that would lay the legal and regulatory foundation for a covered bonds market in the U.S. H.R. 940, the United States Covered Bond Act of 2011, was introduced March 8, 2011, by Rep. Scott Garrett, R-NJ, and reported out of the House Financial Services Committee on June 22, then referred to Ways and Means for consideration of its potential effect on the federal budget. Late last month, the Congressional Budget Office issued a cost estimate of the legislation. “CBO...

Principal reductions hold the potential for a positive impact on the mortgage market by preventing some foreclosures, but residential MBS investors stand to lose from an improperly implemented, wide-ranging loan modification effort, according to Fitch Ratings. The mandated principal reduction provisions in the recent $25 billion settlement involving state attorneys general, the federal government and the five largest mortgage servicers appear to be a “sensible approach” as loan modifications with principal reductions have performed better than other types of mods, but Fitch noted the benefit comes with a...

Though Federal Reserve Chairman Ben Bernanke stated last week that the regulatory agencies would not hit the July 21 deadline for a finalized Volcker rule, such news only leaves the securitization industry with more time to stew in anxiety about a regulation that many feel should not apply to them. The controversial Volcker rule, one of the many required by the Dodd-Frank Act, is designed to limit the ability for financial institutions to benefit financially by shorting their customers, through the prohibition of federally insured banks engaging in proprietary trading, covered transactions with hedge funds or...

Fannie Mae has updated its premium recapture policy by establishing standards for remediation in cases where a lender exhibits a peculiar prepayment behavior. Under the current guide, Fannie Mae has the right to analyze MBS that have high levels of prepayments, including a review of the lender’s origination and refinancing activities to ensure compliance with the government-sponsored enterprise’s requirements. If a lender shows an unusually high level of prepayments, Fannie may restrict any refinancing practice that might inappropriately affect the prepayment pattern for Fannie mortgages...

Ginnie Mae and Credit Suisse struck a “pledge acknowledgement agreement” last week that industry observers think will increase liquidity for mortgage lending and servicing, especially for smaller, independent players, attract more Ginnie lenders and issuers to the marketplace, and lower the overall costs of funding FHA/VA originations. Late last week, Ginnie announced that Credit Suisse has become the first institution to adopt a recently-revised pledge acknowledgement agreement. Through this arrangement, mortgage securities issuers will now be able to more easily tap funds at lower...

Commercial banks increased their stake in the residential MBS market to a record $1.360 trillion as of the end of 2011, with a lot of the growth coming in Ginnie Mae MBS. Bank MBS holdings rose 2.4 percent from the third to the fourth quarter as seven of the 10 largest bank MBS investors reported significant increases. Compared to the end of 2010, bank MBS holdings were up 10.3 percent over a period in which the outstanding supply of single-family MBS continued to decline. Commercial banks held a record 20.9 percent of outstanding residential MBS at the end of last year, based...(Includes two data charts)

Department of Housing and Urban Development Secretary Shaun Donovan told lawmakers this week that the Obama administration was “encouraged” by the early activity in the revamped Home Affordable Refinance Program. And he was bullish on the prospects of HARP 2.0 picking up more volume as the program becomes fully operational by the end of this month. But available data and a new analysis by Inside MBS & ABS suggest that HARP 2.0 is not likely to generate much, if any, more volume over the next two years than HARP 1.0 did over the past three years. In fact, that was the Federal Housing Finance Agency’s...

MBS investors continue to sweat over the impact of the $25 billion multistate servicing settlement, especially regarding potential conflicts of interest when banks own a second mortgage while servicing a securitized first lien. “The minimum requirement is that every time you modify a first lien, you have to modify the second lien to the same degree, or you have to write off the second lien entirely,” explained Shaun Donovan, secretary of Housing and Urban Development, at a housing conference earlier this week. Donovan characterized the treatment of home-equity loans in the settlement as a positive...