Legislative proposals for a TBA market backed by non-agency MBS as an alternative to a market driven by government-sponsored enterprises lack precedence and are full of unknowns, according to analysts. “While this is a laudable effort – and a necessary one in order to remove the government’s sup-port from the housing finance market – the extent to which private enterprise will be able to pick up the slack the GSEs leave behind is unknown,” said Benjamin Feldman, a housing policy analyst and advocate. Peter Wallison, an Arthur F. Burns fellow in financial...

Although primary market lenders will face fewer hurdles in originating refinance loans for underwater Fannie Mae and Freddie Mac borrowers, detailed guidelines released by the government-sponsored enterprises this week confirm that it will take several months before the expanded programs are fully implemented. And when they are, the revamped Home Affordable Refinance Program will generate up to one million new loans that otherwise wouldn’t have happened, according to estimates by Keefe, Bruyette & Woods. That’s just about what the market expected, and it will mean... (Includes one data chart)

Mortgage real estate investment trusts, along with investors, urged the Securities and Exchange Commission to maintain certain exemptions for mortgage REITs or risk further housing finance issues. REITs are seen as key in efforts to reduce the federal government’s current support of mortgage finance. “Mortgage-focused real estate investment trusts, such as Redwood, are well-suited to carry out this key mortgage banking business function,” said Andrew Stone, general counsel for Redwood Trust. “However, these companies need to continue to be able to rely on the [SEC] exclusion in order to efficiently and effectively carry out...

Ginnie Mae reiterated its desire to enhance its MBS disclosures by moving towards a Freddie Mac disclosure model, but officials are not providing specifics or a timeline. During a telephone press briefing on the agency’s fiscal year 2011 results this week, Ginnie Mae President Ted Tozer said the plan to move toward loan-level disclosures is still in play and investors are being consulted regularly on the kind of disclosures they would like to get. “We want to make sure we are doing it in a controlled, prescriptive manner and we want the information that we provide to be superior and consistent,” he said. “We are also...

The Federal Housing Finance Agency and its wards, Fannie Mae and Freddie Mac, want to change servicer compensation to provide more resources for addressing nonperforming loans and try to reduce consolidation in the market, but MBS analysts remain concerned that fiddling with the current system could derail the to-be-announced market. “A big concern is that the TBA market for mortgages is very fragile,” said Jim Gross, vice president of financial reporting and public policy at the Mortgage Bankers Association. “Making radical changes could further rock the market.” The more radical proposal outlined by the...

Redwood Trust took a loss on the $375.2 million jumbo mortgage-backed security it issued at the end of September, officials at the real estate investment trust revealed this week. However, the company plans to issue another jumbo MBS within the next few months and anticipates turning a profit on its non-agency activity in the long-term. ...

The lower loan limits instituted this month for conforming mortgages opened a number of regional opportunities for non-agency lenders. As of Oct. 1, 250 counties have lower government-sponsored enterprise loan limits compared with the conforming loan limits of 2010, according to an analysis by affiliated publication Inside Mortgage Finance. Michael Fratantoni, vice president of single-family research and policy development at the Mortgage Bankers Association, said the portion of the market newly eligible only for non-agency financing is significant in comparison to the amount of non-agency jumbo originations in recent years. ... [includes one data chart]

Long-term investor involvement is the industry’s best bet and “only realistic alternative” to boost housing demand and allow government housing agencies to meaningfully discharge their backlog of real estate owned properties, according to a report by Amherst Securities Group. However, Amherst notes that private investors will require more financing options and better access to bulk portfolios of homes, perhaps through a government program, in order to absorb and convert dormant distressed properties into active, income-producing rentals. “The massive housing market overhang is a clear danger to the U.S. economy – it creates...

The Federal Housing Finance Agency needs to explain why it hired expensive outside counsel instead of dispatching government lawyers in its massive litigation against the nation’s big financial institutions, as well as just how much the agency expects to recoup from the effort, according to a senior Republican congressman.

Servicers face increased costs to meet new loss mitigation requirements. However, servicers at the Mortgage Bankers Association’s annual conference this week in Chicago said they have accepted the costs as a trade-off for decreased liability. “We focus on profitability, but you still have to do quality,” said Kent Lemon, a senior vice president at Saxon Mortgage Services. He said the servicer constantly works on quality assurance. Saxon uses targeted performance monitoring of employees for the Servicemembers' Civil Relief Act, fair servicing standards and other loan modification guidelines. Lemon said the servicer also...