The Federal Reserve’s proposed rulemaking that would establish the “qualified mortgage” as a standard for complying with the ability-to-repay requirement under the Dodd-Frank Act would create a number of significant legal liabilities that will threaten buyers of MBS, Wall Street groups said. The American Securitization Forum emphasized that questions about the lack of objective criteria in the proposal for determining whether a loan is a QM, and how little legal certainty the final rulemaking would actually provide, become of “critical importance when ...

Credit rating agencies and government regulators are making wholesale changes to the way they come up with and use credit ratings in order to prevent a repeat of the financial meltdown, witnesses at a hearing of the House Committee on Financial Services said. “While much has changed with regard to credit ratings and credit rating agencies over the course of the past several years, our fundamental mission remains the same: to provide the market with independent benchmarks about the creditworthiness of ...

The Federal Housing Finance Agency this week filed a lawsuit against UBS Americas alleging misstatements and omissions on non-agency mortgage-backed securities purchased by Fannie Mae and Freddie Mac. FHFA Acting Director Edward DeMarco warned that further action against other non-agency MBS issuers is likely. “From the issuance of 64 subpoenas last year to the filing of this lawsuit and further actions to come, we continue to seek redress for the losses suffered by ...

An increasing number of non-agency mortgage-backed security investors have opposed Bank of America’s proposed $8.5 billion settlement related to buybacks and servicing. The proposed settlement announced last month was seen as a precedent for the sector, though final approval remains far from certain. MBS investors have raised concerns about the settlement price, conflicts of interest and second liens, among other issues. If approved, the settlement would apply to all investors in the 530 Countrywide Financial securities in question, not just to the 22 large firms represented by ...

The impact of lower loan limits on the supply of Ginnie Mae mortgage-backed securities and other agency MBS would be very modest and that such loan limit changes should not affect Ginnie Mae prepayments, according to a recent analysis by Barclays Capital. With respect to agency MBS supply, the “permanent” lower loan limit established by the Housing and Economic Recovery Act of 2008 should cut the combined issuance of both conventional and Ginnie Mae pools by about 5 percent, the report said. The report, among other things ...

As FHA tightens its underwriting further to give more room for private capital in the mortgage market, the federal single-family mortgage insurance program may no longer provide mortgage alternatives for as many “non-qualified residential mortgage” borrowers as it would have in the past, according to a new report issued by the Government Accountability Office. Analyzing the impact of the Dodd-Frank Act on homeowners and the mortgage market, the GAO report concludes that potential changes in the FHA’s role could influence ...

The Department of Housing and Urban Affairs’ Office of the Inspector General recommended that HUD obtain complete documentation to close Ginnie Mae contracts after an audit uncovered flawed procedures at the Office of the Chief Procurement Officer. The OIG called for tighter procedures after finding that the procurement office did not get documentation from Ginnie Mae to close out completed and expired Ginnie Mae contracts in a timely manner. That was a violation of HUD’s guidelines for contract closeout procedures, the internal watchdog unit said. In addition, Ginnie Mae did not follow department guidelines ...

Regardless of whether the White House and Congress come to a debt ceiling deal before the fast approaching Aug. 2 deadline, agency MBS are in for a rough ride, experts say. Last week, Moody’s Investors Service and Standard & Poor’s lit a fire under the debt talks and sparked widespread consternation throughout the MBS arena when they announced that each may cut the U.S. credit rating two double-A within three months if there isn’t a “credible” agreement to address the U.S. debt burden. Consequently, Moody’s placed on review for possible downgrade ...

Fannie Mae this week released a revised prospectus for its single-family MBS program that updates language on non-standard collection options such as biweekly payment plans, certain hybrid ARM pools and loan eligibility. The government-sponsored enterprise also expanded its discussion of representations and warranties provisions affecting its single-family MBS. In addition to requiring sellers to repurchase mortgages that breach the reps and warranties, Fannie said it is important for investors to consider that there are other mandatory and optional cases where loans may be ...

Hedging will become much more expensive for Fannie Mae, Freddie Mac and the Federal Home Loan Banks than for anyone else as proposed new rules on the margining of uncleared derivatives will significantly increase the cost of trading, the GSEs warned federal regulators.GSEs regulated by the Federal Housing Finance Agency weighed in via comment letters on the rules proposed in April by the FHFA, as well as the Federal Reserve, the Farm Credit Administration, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency.