The volume of loans guaranteed by the Department of Veterans Affairs rose 4.0 percent in the third quarter of 2012, reflecting an upward trend that the agency attributes to strong underwriting. A production increased to $33.3 billion from $32.0 billion in the second quarter and $28.3 billion in the first quarter. The agency reported $93.6 billion in total originations over the nine-month period, with refinancing accounting for 51.8 percent of guaranteed loans. “VA has had the best performing loans in the industry for quite some time, with the ... [1 chart]

The three-month surge in agency MBS issuance appeared to run out of steam in October, as total agency securitization of single-family mortgages dropped 11.4 percent from the previous month, according to a new market analysis and ranking by Inside MBS & ABS. The sharpest decline was in Fannie Mae issuance. The government-sponsored enterprise cranked out $58.92 billion in single-family MBS last month, down 28.4 percent from September’s volume. It marked the lowest monthly production for Fannie since April, when the GSE issued just $46.12 billion in volume. Securitization activity at Freddie Mac was...

The Securities and Exchange Commission last week approved a proposal from the Financial Industry Regulatory Authority to increase transparency regarding MBS and ABS trading. Hearing no public comments after it announced the proposal in September, the SEC agreed to FINRA’s plan to establish public reporting of trading in specified government-backed mortgage bonds and securities backed by Small Business Administration loans. According to the SEC notice published Oct. 23, the plan would leverage...

The Securities and Exchange Commission’s overdue “Franken amendment” study will be out soon and may include alternatives to the issuer-pay ratings model, the agency’s chief, Mary Schapiro, said last week at the annual meeting of the Securities Industry and Financial Markets Association. “The issuer-pay model has inherent conflicts in it,” Schapiro said, referring to the prevailing system in which securities issuers generally pay to obtain ratings from the credit rating services. The SEC head provided no additional specifics regarding the alternatives that might be featured in the agency’s pending report. The Franken amendment study is...

Basel III capital requirements proposed by federal regulators will have a significant negative impact on U.S. bank holdings of agency and non-agency MBS, according to industry participants. The capital requirements have yet to be finalized and are currently scheduled to begin being phased in Jan. 1 with full implementation in 2018. In June, the Federal Deposit Insurance Corp., the Federal Reserve and the Office of the Comptroller of the Currency proposed rules to implement Basel III capital standards – the most comprehensive overhaul of the U.S. bank capital framework since Basel I was implemented in 1989. Comments were due last week, and strong warnings were submitted by trade groups representing MBS market participants, banks and mortgage lenders. “If the Basel III [proposed rule] were implemented...

Participants in the non-agency mortgage-backed security market expect the amount of MBS backed by newly originated non-agency mortgages to increase significantly in 2013 and beyond – even without reform of the government-sponsored enterprises. A number of factors have combined to make the market ripe for new non-agency MBS, according to attendees at the ABS East conference sponsored by Information Management Network this week in Miami. “Borrowers want loans, lenders want to lend and investors want yield,” ... [Includes one data chart]

Two more funds started to exit the Public-Private Investment Program in the third quarter of 2012. Returns from the program – which largely focuses on investing in vintage non-agency mortgage-backed securities – remain strong and the Public-Private Investment Funds can manage their holdings for at least the next five years, but four of the original nine PPIFs have now exited the PPIP. In July, RLJ Western terminated its PPIF’s investment period four months ahead of schedule. The notification occurred shortly after ...

Prices on vintage non-agency mortgage-backed securities have increased significantly in the past three months and are expected to remain elevated. The strong returns are being driven by improvements in home prices and loan performance along with decreased supply. “The numerous positive developments in the non-agency space should continue to benefit the non-agency market in the fourth quarter,” said analysts at Bank of America Merrill Lynch. “We see the sector as fundamentally undervalued at current levels.” ...

New pool level data issued by Ginnie Mae reveal a rising share of FHA-insured loans that have refinanced with grandfathered mortgage insurance premiums (MIP) in new Ginnie Mae mortgage-backed securities issuances, according to analysts. Of particular interest to investors is the share of borrowers with existing FHA-insured home loans who took advantage of an opportunity to refinance on advantageous terms under the FHA Streamline Refinance program, said analysts at Bank of America Merrill Lynch. Under the revised rules of the FHA Streamline Refi program, FHA-insured mortgages endorsed before June 1, 2009, were ...

The Department of Housing and Urban Development is mulling a recommendation by its Inspector General to consider indemnifications, civil fines or remedies under the False Claims Act against an approved California lender for allowing the recording of restrictive covenants that put the FHA insurance fund at risk for losses. The IG audit report also recommended that HUD require the lender, Shea Mortgage of Aliso Viejo, CA, to reimburse the FHA for $1.47 million in claims paid on 11 FHA-insured loans that contained prohibited restrictive covenants. Under HUD rules, any recorded agreement between the ...