SunTrust Banks, Inc. is planning to shift $3 billion of loans, including an undetermined number of delinquent Ginnie Mae loans and other nonperforming loans, to its held-for-sale portfolio and record a $375 million provision for mortgage repurchases in the third quarter of 2012. The moves are expected to strengthen SunTrust’s mortgage portfolio and put the company in a better position by improving its risk profile and balance sheet and stabilizing its capital ratios. The $3 billion transfer of loans to the held-for-sale (HFS) category will include ... (1 chart)

Uncertainty about risk in a rapidly changing regulatory environment and the still destabilized economics of the housing market continue to keep private capital from returning to the mortgage market, according to industry officials at this week’s American Mortgage Conference sponsored by the North Carolina Bankers Association. “Everybody’s very concerned about the role of the government, that the government is supporting too much of the marketplace today,” said Meg Burns, senior associate director for housing and regulatory policy for the Federal Housing Finance Agency. “But it’s really hard to envision how people can pull back from that government support when we don’t actually understand not only who holds the credit risk but what the requirements are for retaining that risk in terms of capital.” All of the Dodd-Frank Act regulations that are still in play are...

New issuance of single-family agency MBS pass-through securities increased by 12.2 percent from July to August, pushing the market over the $1 trillion mark for the year with plenty of gas still in the tank. A new Inside MBS & ABS ranking and analysis reveals that all three agencies saw solid gains in MBS issuance last month, largely based on increased refinance activity. Agency MBS production climbed to $149.2 billion in August, the highest monthly production level since March. Ginnie Mae posted the biggest gain, a 15.1 percent increase from July levels, but Freddie Mac (13.5 percent) and Fannie Mae (10.3 percent) also saw healthy increases in production volume. Total agency issuance for the first eight months of 2012 was...[Includes one data chart]

The battle over legacy MBS continues to rage in courts across the country as Bank of New York Mellon filed repurchase-related lawsuits against two financial institutions, Massachusetts Mutual was allowed to proceed with its claims against Countrywide, and a federal banking regulator sued major banks for alleged MBS misrepresentations. On Aug. 21, BNY Mellon, in its capacity as trustee for a pool of loans known as GE-WMC Mortgage Securities Trust 2006-1, sued WMC Mortgage and GE Mortgage Holdings for their alleged failure to repurchase approximately $680 million in defective residential mortgages. According to the lawsuit filed in New York state court, a holder of more than 25 percent of the voting rights under the pooling and servicing agreement notified...

The Federal Housing Finance Agency is pushing its own version of mortgage reform: an ambitious agenda of standardizing Fannie Mae and Freddie Mac securitization operations to the point that their MBS are interchangeable. The plan, hatched in the absence of any substantial move by Congress or the Obama administration to address the nearly four-year-old conservatorships of the government-sponsored enterprises, has won broad endorsement from the lending and securitization industries. But some analysts say the FHFA strategy will make things worse, not better. Karen Shaw Petrou, managing partner of Federal Financial Analytics, a proprietary think-tank in Washington, DC, characterized the idea as “seductive” and “dangerous as all get-out.” First, there’s the issue of whether the two GSEs could be...

Following the collapse of the non-agency market, critics of banks have suggested that MBS issuers could be liable for significant tax payments due to violations of real estate mortgage investment conduit rules. However, the IRS has yet to act on the issue and officials at the IRS downplayed suggestions of a wide-scale investigation. REMICs receive tax advantages as passive, static investments. The IRS requires that mortgages be transferred to the trust within a certain timeframe, usually within 90 days after the trust is created. Some have suggested that the improper assignment of mortgages to REMICs is...

$7.5 Million FHA Mortgage Fraud Scheme. The Department of Justice has filed charges against top executives of a real estate brokerage for their participation in a mortgage fraud scheme that may cost the FHA $7.5 million in losses. Indictments were unsealed earlier this month in Manhattan federal court charging Mitchell Cohen and Erin Davis, the owner and sales manager, respectively, of Buy-A-Home, a real estate brokerage business in Queens, NY. The criminal charges follow a civil fraud lawsuit filed by the U.S. Attorney’s Office for the Southern District of New York last December against ...

A lawsuit filed last week by Bank of New York Mellon against WMC Mortgage and GE Mortgage Holdings is the latest sign that repurchase issues on non-agency mortgage-backed securities are increasing. After years of resistance, trustees are starting to act on behalf of non-agency MBS investors seeking repurchases. Three of the four major banks reported increases in non-agency repurchase requests in the second quarter of 2012 compared with the previous quarter, according to an analysis by Inside Nonconforming Markets ...

The rating services report increasing inquiries regarding potential ratings for securitization of income from real-estate owned rental properties. The first REO rental non-agency mortgage-backed security could be issued later this year, but Suzanne Mistretta, a senior director at Fitch Ratings, suggested that AAA ratings are unlikely initially. “The lack of historical data and ambitious growth strategies by regional operators will make high investment-grade ratings on these transactions difficult ...

Fannie Mae and Freddie Mac’s newly amended preferred stock purchase agreement with the U.S. Treasury requiring the companies to accelerate the rate at which they reduce their investment portfolios will have little immediate impact but will become more challenging to the GSEs as time goes on, analysts predict. The Treasury’s amended agreement calls for the GSE portfolios to be wound down at an annual rate of 15 percent, instead of the 10 percent annual reduction originally required of the two companies. The more aggressive 15 percent reductions will go into effect in 2013. Consequently, Fannie’s and Freddie’s portfolios must be reduced to the $250 billion target by 2018, four years earlier than initially scheduled.