The Federal Housing Finance Agency’s recent proposal to revamp servicer compensation has received mixed reactions from non-agency participants. High-touch servicers approve of the landscape-shifting fee-for-service proposal but analysts suggest that the system would be much more difficult to establish for non-agency mortgages than for agency loans. Ocwen Financial and other servicers that predominantly handle delinquent mortgages favor the FHFA’s proposal that would significantly increase the fees paid to service delinquent loans and lower the base servicing fee for performing loans, perhaps to...

Mortgage real estate investment trusts, along with investors, urged the Securities and Exchange Commission to maintain certain exemptions for mortgage REITs or risk further housing finance issues. REITs are seen as key in efforts to reduce the federal government’s current support of mortgage finance. “Mortgage-focused real estate investment trusts, such as Redwood, are well-suited to carry out this key mortgage banking business function,” said Andrew Stone, general counsel for Redwood Trust. “However, these companies need to continue to be able to rely on the [SEC] exclusion in order to efficiently and effectively carry out...

A number of real estate investment trusts – besides Redwood Trust – are hoping to issue non-agency mortgage-backed securities in the coming years. PennyMac Mortgage Investment Trust and Two Harbors Investment have taken two significantly different strategies to reach that goal. PennyMac has focused on investing in non-performing whole loans and has established a correspondent lending platform, including some jumbo activity. The REIT is also establishing warehouse lending capabilities, with a roll-out planned by mid-2012. In the near-term...

Recent modifications on non-agency mortgages performed relatively well but mod activity is slowing down, according to new data. The relative lack of activity applies to both the Home Affordable Modification Program and proprietary non-agency mod efforts. About 33.5 percent of non-agency mortgages were delinquent as of the third quarter of 2011, according to LoanPerformance, and 46.0 percent of all non-agency borrowers have negative equity. However, Fitch Ratings found that only 24.0 percent of outstanding non-agency mortgages (measured by loan balance) have been modified at least once, up from 20.0 percent at the...

Two new bills aimed at increasing non-agency activity were introduced in the Senate last week. One would wind down the government-sponsored enterprises while the other would establish a framework for covered bonds. S. 1834, “The Residential Mortgage Market Privatization and Standardization Act” introduced last week by Sen. Bob Corker, R-TN, would gradually reduce the portion of the mortgage-backed security guarantee provided by Fannie Mae and Freddie Mac. Within 180 days of the bill’s enactment, the GSEs could only issue MBS with a guarantee for 90 percent of a bond. The guarantee on...

The fallout from Taylor, Bean & Whitaker’s collapse in 2009 continues to haunt Ginnie Mae after a recent independent auditor’s report found a potential overstatement of the agency’s portfolio of mortgages-held-for-investment (MHFI) apparently linked to the TBW debacle.The report by Clifton Gunderson, a Fairfax, VA-based certified public accounting firm, attributes the apparent portfolio anomaly to the current document custodian’s failure to complete a review and provide a final certification on the non-performing TBW loans. Ginnie Mae repurchased the loans from the defaulted TBW mortgage-backed securities pools and reclassified them as MHFIs. Overall, independent auditors signed off on Ginnie Mae’s FY 2011 balance sheet and found no material weaknesses in internal control over financial reporting or any instance of noncompliance. Auditors, however, noted ...

After years of on-again, off-again activity behind the scenes while the House of Representatives has repeatedly taken tentative steps toward creating a covered bond marketplace, the Senate finally got into the game with the introduction this week of legislation nearly identical to the bill introduced in the House earlier this year. On Wednesday, a small bipartisan group from the Senate Banking, Housing and Urban Affairs Committee introduced the “United States Covered Bond Act of 2011,” which is designed to create a legislative framework to expand funding options for U.S. financial institutions. Co-sponsors include...

Republican Sen. Bob Corker this week introduced legislation that would wind down Fannie Mae and Freddie Mac in part by limiting their new MBS issuance to a declining share of total new mortgage securitization. The Tennessee lawmaker’s Residential Mortgage Market Privatization and Standardization Act would “responsibly unwind” the government-sponsored enterprises by gradually reducing their portfolios of guaranteed mortgage-related assets while taking steps to bring uniformity and transparency to the housing market so that private capital can begin to replace the GSEs. The Corker bill would annually reduce the...

Industry groups are taking seriously new legislation introduced on Capitol Hill that would impose a tax on all securities trading activity, even if most observers see little likelihood of such “Robin Hood” tax legislation being enacted by a polarized Congress. Sen. Tom Harkin, D-IA, and Rep. Peter DeFazio, D-OR, last week introduced the Wall Street Trading and Speculators Tax Act, which would impose a 3 basis point tax on all non-consumer trading of securities, stocks, bonds, interests in partnerships and trusts, and derivative financial instruments. The tax would not be applied on new issuance or debt with...

Fannie Mae and Freddie Mac lost a combined $9.2 billion during the third quarter – mostly due to writedowns on derivatives transactions – while the two government-sponsored enterprises continued to watch their massive MBS holdings decline. As of the end of September, Fannie and Freddie held a combined $754.54 billion of MBS in their retained portfolios, down 1.1 percent from the second quarter and a decline of 7.4 percent from the same July through September period last year. Fannie’s holdings of non-agency MBS fell 2.2 percent to $77.1 billion during... (Includes one data chart)