Moving toward a uniform MBS for the two government-sponsored enterprises is widely viewed as a good thing for bond investors – and the mortgage industry at large – but it creates new potential risks if things go haywire, according to Fannie Mae.
Some in the industry have criticized Freddie Mac’s Integrated Mortgage Insurance credit-risk transfer program, but its founders recently spoke out to clear the air on a number of misconceptions. Top executives at both Arch Capital and Freddie defended the new credit-risk transfer program in which they are partners. A group of mortgage insurers complain that the program creates an unlevel playing field and promotes “capital arbitrage.” Andrew Rippert, CEO of Arch Capital, said during a recent industry conference that counterparties must keep up with changing times. He said one of the goals of IMAGIN is to deliver a more efficient form of mortgage insurance at a lower cost to borrowers.
Most real estate investment trusts that specialize in the agency MBS market allowed their portfolios to decline slightly in the first quarter of 2018, according to a new Inside MBS & ABS analysis. [Includes one data chart.]
A handful of nonbanks are preparing to enter the non-agency MBS market as issuers of deals backed by non-qualified mortgages. Investor demand for the products remains strong, prompting interest from new entrants.
The Seventh Circuit Court shot down the chances of Fannie Mae and Freddie Mac shareholders reviving their Treasury sweep claims last week. Investors Christopher Roberts and Thomas Fischer argued that the preferred stock purchase agreement was illegal and robbed shareholders of their profits.
Non-agency MBS traders defeated charges brought by the federal government in two separate cases late last week. In one case, a judge ruled that a lower court erred by admitting evidence against the trader; in the other, a jury determined that bluffing by a trader didn’t warrant a conviction.
The Consumer Financial Protection Bureau should not take enforcement action against securitization trusts for the acts of servicers, the Structured Finance Industry Group said.
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