Ginnie Mae is requesting additional funding in FY 2013 to hire more professionals to help manage the more than $1.2 trillion in outstanding guaranteed mortgage securities it holds and the increasing inherent risks associated with the MBS. Under its budget proposal, the agency is seeking an appropriation of $21 million for staff salaries and expenses in 2013, up from $19.5 million in 2012 and $11.07 million in 2011. The requested staffing increase would ensure improvement in managing areas where Ginnie Mae has the greatest risk exposure, including counterparty risk and defaulted portfolio management, according to the agency. Over the past few years, Ginnie Mae’s market share rose ...

Congress should consider changing the mandate of the Federal Housing Finance Agency’s conservatorship of Fannie Mae and Freddie Mac to address a “conflict of interest” that inhibits the Finance Agency’s supervision of the GSEs, a housing economist told senators this week.Testifying before the Senate Committee on Banking, Housing and Urban Affairs, Columbia School of Business Professor Christopher Mayer said a significant problem with the ongoing operation of the GSEs has been the failure to adequately address operational conflicts.“The evidence suggests that the conflict of interest between the businesses of providing mortgage guarantees and managing a large retained portfolio of mortgages and [mortgage-backed securities] has led to obstacles to normal credit conditions,” said Mayer.

Both Fannie Mae and Freddie Mac retained sizeable shares of mortgage securities with a not insignificant bump during the fourth quarter of 2011, according to a new Inside The GSEs analysis.The GSEs issued a combined $261.6 billion in MBS in the fourth quarter, a 13.0 percent increase from the third quarter.Fannie and Freddie dropped to $852.8 billion in MBS issued for the year, an 11.1 percent decrease in MBS issuance during the January to December period. The GSEs’ issuance represented 72.1 percent of total MBS produced during 2011.Between the two companies, Fannie and Freddie registered an ample 77.1 percent share of new MBS issued during the quarter that ended Dec. 31, 2011, up from the 69.1 percent the two companies held during the third quarter and surpassing the 74.8 percent share both GSEs held during the first quarter.

The newly announced $25 billion settlement over foreclosure servicing practices is not expected to have much impact on MBS investors because most of the principal reductions that the five banks agreed to make will involve unsecuritized mortgages they hold in portfolio. The settlement involves all states except Oklahoma, two federal agencies and five major servicers, and requires the banks to “work off up to $17 billion in principal reduction and other forms of loan modification relief nationwide,” according to a summary of the agreement. Although the actual settlement had not been released as...

A new report from Fitch Ratings finds that risk appetite is returning to the U.S. triparty repo market, thanks in part to deeply discounted collateral, much of which is in the form of Alt A and subprime residential MBS and collateralized debt obligations. Fitch’s study of the market is based on repo transaction information drawn from a sample of the 10 largest U.S. prime money market funds’ financial statements. Fitch’s sample encompasses about $90 billion in repo transactions as of the end of August 2011, which represents slightly more than 5 percent of the $1.6 trillion U.S. triparty repo market...

The Federal Reserve Bank of New York ended a week of speculation in the non-agency MBS market with the sale, through competitive bidding, of $6.2 billion of MBS linked to the taxpayer bail-out of mega-insurer AIG. The winning bid came from Goldman Sachs, one of five firms the Fed invited to submit bids on the multibillion-dollar Maiden Lane II (ML II) portfolio of subprime MBS held by the agency. The other bidders included the securities arms of Morgan Stanley, Royal Bank of Scotland, Barclays and Credit Suisse. This week’s transaction followed a $7.0 billion MBS sale on Jan. 19 to Credit Suisse from the same...

Moody’s Investor Services ranked as the most active rating service in the non-mortgage ABS market last year, but finished 2011, as the least involved in non-agency MBS activity, according to a new Inside MBS & ABS ranking and analysis. Moody’s rated a total of $89.3 billion of non-mortgage ABS last year, or 70.4 percent of total issuance. That was up from a 53.7 percent share in 2010, when Moody’s rated some $58.9 billion and finished second to Standard & Poor’s. Moody’s strengths in 2011 were in the credit card, vehicle finance and business loan sectors, capturing over 70.0 percent of each of those...

A week after federal and state enforcement agencies launched a residential MBS investigative effort, reports have surfaced that Ally Financial, Bank of America, Citigroup, Deutsche Bank and Goldman Sachs are about to be sued by the Securities and Exchange Commission for allegedly misrepresenting the quality of mortgages they packaged and sold to investors. Officials at the SEC, which never confirms specific Wells Notices of impending legal action, declined to comment on the investigation, as did spokesmen for Ally, Citi and Goldman. Representatives from Bank of America and Deutsche Bank did not...

Both the Federal Housing Finance Agency and Freddie Mac are refuting a published report suggesting that a mortgage finance vehicle at one time employed by the government-sponsored enterprise was designed to profit the company by preventing homeowners from refinancing. An article published this week by ProPublica and National Public Radio contended that Freddie stood to profit from hedging investments known as inverse floaters that would pay higher returns if interest rates rose and more homeowners remained in mortgages with high interest rates. According to ProPublica, Freddie purchased inverse floaters...

Federal and state enforcement agencies late last week launched a broad new initiative to investigate and develop litigation on fraud and misconduct in the non-agency MBS market, issuing civil subpoenas to 11 financial companies. The RMBS Working Group is being co-chaired by five officials: two assistant attorneys general in the Justice Department, the head of enforcement at the Securities and Exchange Commission and state attorneys general from New York and Colorado. Some 55 DOJ officials are participating, including 15 attorneys and 10 Federal Bureau of Investigation agents, with 30 more attorneys...