Fannie Mae and Freddie Mac issued $154.95 billion in single-family mortgage-backed securities during the second quarter of 2011, a 40.6 percent drop from the first three months of the year.The recent April-June cycle represented the second straight quarterly decline in business volume since the fourth quarter 2010 surge when the two GSEs issued $331.5 billion in MBS.

Another bipartisan bill to overhaul the federal mortgage finance system introduced by two House members this week would eliminate but effectively merge Fannie Mae and Freddie Mac, replacing the two GSEs with a “secondary market facility” that would issue and guarantee mortgage-backed securities.The bill, H.R. 2413, the Secondary Market Facility for Residential Mortgages Act of 2011, would create a single entity, owned by the federal government, that would issue MBS. The MBS would have an explicit government guarantee paid for by a guarantee fee set by the Federal Housing Finance Agency.

An official from the Federal Reserve Bank of New York defended the joint agency proposed rule on risk retention, claiming that it doesn’t do anything to block incentives to securitize. The proposed rule has been widely criticized by Wall Street and other financial institutions, which have urged the agencies to start over again with a new proposal. “I don’t understand how you would get...

Ginnie Mae has made some changes regarding the collection and reporting of data on the underlying collateral that backs outstanding Ginnie Mae MBS. The goal is to expand the type of data collected at pool issuance to provide greater transparency and more relevant information to investors. The technical changes were laid out this week for Ginnie Mae program participants during a webinar hosted by the agency. Some of the changes relate...

Overseas investors were net sellers of U.S. agency notes and bonds – including agency MBS – during the first quarter of 2011, according to an analysis of market data by the Securities Industry and Financial Markets Associations. Foreign investors bought some $5.46 billion of agency paper during the first quarter of this year, but that wasn’t...[Includes one data chart]

The FHA has clarified its approval and recertification process and policies for condominium projects in newly revised guidelines. Guidance in Mortgagee Letter 2011-22 formalizes and expands policies Ginnie Mae put in place in 2009 and lays the groundwork for a formal rulemaking later this year. The mortgagee letter includes a condominium policy guide and implementation schedule laying out timelines for compliance. The revised guidelines “preserve FHA’s role in the condo market during these difficult times while making certain we manage risks in a responsible way,’ said FHA Acting Commissioner Robert Ryan. Overall, the mortgagee letter and guide spell out...

Ginnie Mae has agreed to issuer requests for changes regarding the collection and reporting of new pool data to provide clearer and more transparent information to investors. The changes were announced during a webinar with program participants in connection with eight new data elements on all single-family forward mortgages, which issuers are required to provide on all submissions beginning Sept. 1. Ginnie Mae announced the new requirements in APM 11-05, along with a new file layout that would accommodate the new data elements. The new data fields will show the following: combined loan-to-value ratio percent; total debt expense ratio...

Lawmakers on the House Financial Services Committee this week approved by a wide bipartisan margin a bill that would create the legislative framework for a covered bond market in the U.S., but not before some haggling regarding the role of the federal regulators. The committee voted 44-7 in favor of H.R. 940, the U.S. Covered Bond Act of 2011, clearing the way for the bill’s consideration by the full House of Representatives. Rep. Scott Garrett, R-NJ, chairman of the House Financial Services Subcommittee on Capital Markets and Government-Sponsored Enterprises, said H.R. 940 sets up “legal certainty” that is a core element of...

The challenges confronting the recovery of the non-agency MBS market are many, but legacy issues, such as representations and warranties, are the cause of huge frustration in the industry, according to panelists at the American Securitization Forum this week. “Some of these legacy issues have very far-reaching tentacles,” observed Mani Sabapathi, principal at Prudential Fixed Income. The housing finance world has been bracing for the coming risk-retention rule with great apprehension, he said, raising the possibility that reps and warrants could be included as a part of it. “I think it can be an important aspect to the extent that if you have these loans that don’t meet...

It was a bad litigation week for MBS issuers after a federal regulator and a federal judge filed lawsuits and certified a class action, respectively, on behalf of institutional investors that lost billions of dollars when the collateral underlying the securities dropped in value. On June 20, the National Credit Union Administration, acting as liquidating agent for five failed credit unions, filed lawsuits against JPMorgan Securities and RBS Securities for allegedly misrepresenting the risks of MBS investments and systematically disregarding underwriting guidelines. The NCUA is seeking to recover more than $800 billion in MBS losses that led to...