The Obama administration last week pushed the Department of Housing and Urban Development and the Federal Housing Finance Agency to consider reducing the high-cost conforming loan limits beginning in 2013. However, significant opposition from Realtors, home builders and members on both sides of the aisle in Congress has prevented previously planned declines. “In order to reduce the government’s footprint over several years, we recommend allowing FHA loan limits to fall at the end of 2013 as currently scheduled,” the Obama administration said. “Beyond that, HUD and FHFA should closely examine using their existing authorities to reduce loan limits further consistent with the pace of the recovery, market developments, and the administration’s principles and transition plan for housing finance reform.” In 2008, Congress increased...

As of the midway point in 2013, Fannie Mae and Freddie Mac were only slightly ahead of the pace they will need to maintain this year to reach portfolio-shrinkage targets set by their regulators, according to a new Inside MBS & ABS analysis. Under the revised terms of their bailout agreements, the two government-sponsored enterprises are required to reduce their retained portfolios by 15.0 percent by the end of this year. Through the first six months of 2013, the GSEs had shrunk their mortgage portfolios by 8.7 percent. But the Federal Housing Finance Agency has also directed...[Includes one data chart]

Many investors that bought into Freddie Mac’s recent $500 million risk-sharing transaction are looking forward to future credit-risk investing opportunities with the government-sponsored enterprises. And investors that stayed away from the deal could be swayed by expected tweaks to the risk-sharing deals mandated by the Federal Housing Finance Agency. Freddie said about 50 investors participated in its Structured Agency Credit Risk Debt Notes offering, including mutual funds, hedge funds, real estate investment trusts, pension funds, banks, insurance companies and credit unions. Some companies had to reduce their planned investments because the deal was oversubscribed. “We put...

Standard & Poor’s is defending its status as the top rating service in the non-agency MBS market through the first half of 2013, having put its stamp on 39.0 percent of the growing market, according to a new Inside MBS & ABS ranking. S&P has been the top non-agency MBS rating agency over the years but saw DBRS capture the title in 2012 with 54.8 percent of rated transactions. The non-agency ratings business has become significantly more fragmented than it was before the financial collapse, when S&P often rated more than 90.0 percent of the deals that came to market. Both Fitch and Kroll Ratings are...[Includes two data charts]

Fitch Ratings recently updated its criteria for estimating losses on residential MBS transactions, introducing three new variables that influence default expectations, including the origination channel. Fitch said it has determined that loans originated through a direct retail channel have a lower default risk than those originated through brokers or correspondents. To account for this risk, the rating agency is now assigning a higher default probability to loans originated through non-retail channels. This newly added variable is applied...

Although additional defendants sued by the Federal Housing Finance Agency are expected to sooner or later cut deals to settle fraud charges over the sale of non-agency MBS to Fannie Mae and Freddie Mac, banks with larger exposures may calculate that their best bet is to let it play out in court, according to a new report by Fitch Ratings. Fitch noted that the FHFA’s announcement last month that UBS Americas will pay some $885 million to settle claims concerning MBS that UBS sold to the two government-sponsored enterprises is a significant event as other defendants crunch the numbers before deciding whether to proceed with a lengthy and expensive trial or to cut their losses. “Although not necessarily setting a formal precedent, the high settlement costs to UBS relative to the outstanding portfolio amount could lead...

Although Fannie Mae and Freddie Mac are at near records on issuing bonds backed by multifamily mortgages, the Federal Housing Finance Agency is now soliciting comments from the public on how to pare the role of the government-sponsored enterprises in that business. The agency recently published notice that it wants input from the industry in evaluating “alternatives for further contracting the multifamily business” and is seeking views “on the potential market impact of various strategies.” According to figures provided to Inside MBS & ABS, Fannie is...

Mortgage servicing transfers are likely to continue, particularly to nonbanks like Ocwen and Nationstar, with modest effect on most non-agency deals, according to a new study from Barclays Securitized Products Research. Researchers said the valuation effect of these servicing transfers is generally modest for most senior securities, with the exception of some that are likely to benefit from certain factors. Investors should also be aware of potential forbearance-related write-downs in these transferred deals, which may adversely affect subordinate bonds in the structure, they cautioned. The study attributes...

Fannie Mae will lower its maximum LTV. Mortgage insurance firms are not happy. Meanwhile, NAMB blames shrinking application volumes on summer vacations.

When the government took control of Fannie Mae and Freddie Mac almost five years ago, the thought of securitizing multifamily loans had already been planted, but both preferred the idea of holding the paper in portfolio for obvious reasons: high returns and ultra-low delinquencies. Today, both GSEs are securitizing a record amount of MF mortgage-backed securities – but all of that is about to change with the Federal Housing Finance Agency forcing them to shrink their balance sheet holdings including multifamily. Moreover, FHFA is now soliciting comments from the public on how to whittle down the GSEs’ role in the MF business. The agency recently published notice that it wants input in evaluating “alternatives for further contracting the multifamily business” and is seeking views “on the potential market impact of various strategies.”