A ranking Republican on the House Financial Services Committee this week gave notice that GOP lawmakers will be looking to rein in the Federal Reserve’s “radical” and unfettered influence and authority over the nation’s financial system during the 113th Congress next year. Rep. Scott Garrett, R-NJ, chairman of the House Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises, outlined his two top priorities for Congress in 2013 just as the Federal Open Market Committee announced plans to add about $40 billion a month to its massive agency MBS portfolio. Garrett said the committee’s first priority will be...

The mortgage securitization rate through the first half of 2012 was down a few ticks from the record level reached in the first quarter of the year, but the market remained dominated by lending for Fannie Mae, Freddie Mac and Ginnie Mae MBS programs. A huge 91.5 percent of new mortgage originations were financed through the agency MBS programs during the first half of 2012, according to a new Inside MBS & ABS analysis. That’s down from the 95.8 percent securitization rate achieved in the first quarter, but it’s comfortably ahead of the securitization rates posted since the financial crisis of 2008. The sky-high securitization rate is partly due...[Includes one data chart]

The Securities and Exchange Commission has decided to set aside efforts to standardize credit ratings due to serious concerns raised by credit rating agencies and other market participants. Instead, the SEC said it will focus on rulemaking under the Dodd-Frank Act to achieve transparency in credit rating performance and in the methods used to determine credit ratings. In a mandated report to Congress on the standardization of credit ratings, the SEC said...

As unpalatable as it may sound to MBS investors, a hedge fund executive said it’s well past time for the mortgage industry to cut its losses by forgiving principal and re-underwriting troubled mortgages to more traditional criteria in order to revitalize the sector and the broader economy. Michael Corasaniti, chief executive officer of Tourmalet Advisors, a hedge fund in New York City, told attendees at the American Mortgage Conference sponsored by the North Carolina Bankers Association this week that old-fashioned manual underwriting is the way out. “Early in my career, I was...

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...