A Senate lawmaker and the Mortgage Bankers Association warned House lawmakers that a narrow “qualified residential mortgage” rule will result in overuse of the FHA program and make it more difficult for private capital to re-enter the housing finance market. Testifying before the House Financial Services Subcommittee on Insurance, Housing and Economic Opportunity last week, Sen. Johnny Isakson, R-GA, said the six federal agencies charged with crafting risk-retention requirements apparently failed to consider the impact of a narrow QRM rule on the FHA program. Isakson, who co-authored a Senate exception to...

The Federal Housing Finance Agency’s legal action late last week against many of the nation’s largest financial institutions on the grounds they misled Fannie Mae and Freddie Mac about the quality of subprime and Alt A MBS purchased by the government-sponsored enterprises has few positives but plenty of negative potential consequences for the market, experts say. The 17 separate lawsuits filed by the FHFA seek unspecified damages on $196 billion in mortgage securities the two GSEs purchased, mostly between 2005 and 2008. The agency conducted extensive loan-level reviews that allegedly revealed widespread discrepancies between... [Includes two pages of data]

Private investors in agency MBS could lose $13 billion to $15 billion from a new government effort to help current Fannie Mae, Freddie Mac and FHA borrowers refinance, according to a new Congressional Budget Office staff working paper. The Obama administration is expected to announce a revved-up refinance program as part of a new strategy to strengthen economic growth. A “stylized” refinance program analyzed by the CBO would have a relatively small impact on the overall economy, the analysts said. The biggest impact would be on private MBS investors and the estimated 2.9 million households that would likely be brought into the...

The securitization market needs less uncertainty and a great deal more transparency in order to restore investor confidence and lure back private capital, industry executives told members of the House Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises. Witnesses testifying before the subcommittee, which held a field hearing in New York City, said the state of the securitization market remains uncertain, not just due to government subsidies crowding out any private sector action but also because hesitant investors do not yet see much improvement in the opaque environment that led to the...

Ginnie Mae in a conference call with its MBS issuers said it is going to be focusing its attention on new definitions related to data collection, and urged industry participants to provide feedback. Currently, the loan-to-value ratio definition stands as the ratio of the current unpaid principal balance amount to the appraised value, estimated value or purchase price of the property, and that value must include the upfront mortgage insurance premium. Under the new definition, however, the LTV ratio would be based on the original principal balance, said Ginnie officials. This includes any mortgage insurance premium to lower the sale price or...

Facing a statute of limitations deadline, the Federal Housing Finance Agency filed lawsuits against 17 firms last week in an effort to recover losses the government-sponsored enterprises suffered on their investments in non-agency mortgage-backed securities. The FHFA claimed violations of securities laws, alleging that non-agency MBS prospectuses contained material false statements and omissions. The lawsuits relate to more than $196.2 billion in non-agency MBS purchased by the GSEs. The GSEs’ combined holdings of subprime and Alt A MBS have declined since at least the fourth quarter of 2007 when they totaled $217.2 billion, according to an analysis by Inside Nonconforming Markets,. ...

The American Securitization Forum positioned its new model repurchase principles as a better option to restore investor confidence in non-agency mortgage-backed securities than the risk retention required by the Dodd-Frank Act. “The risk-retention rules proposed by regulators are not sufficiently tailored to different asset classes and will likely cause a host of negative unintended consequences,” said Tom Deutsch, executive director of the ASF. ...

The Securities and Exchange Commission this week asked for public comment as it begins to reconsider whether mortgage real estate investment trusts and other mortgage-related pools that acquire mortgages and mortgage-related instruments should remain exempt from the requirements of the Investment Company Act. The SEC said it is concerned that some mortgage-related pools, as pooled investment vehicles, may raise...

Banks and thrifts held a record $1.491 trillion of residential MBS in portfolio as of the end of June, according to a new Inside MBS & ABS analysis and ranking of call report data. That was up 1.6 percent from the end of the second quarter and marked the fourth consecutive period of growth in the industry’s MBS holdings. Banks and thrifts owned about 22.8 percent of the estimated $6.535 trillion of MBS outstanding at the end of the second quarter. All the growth came in investments in agency structured finance transactions, mostly REMICs. Bank and thrift holdings of agency REMICs jumped 8.6 percent in the second quarter to $459.9 billion, or 30.8 percent of... [Includes two data charts]

Any modified FHA or VA loan can now be repurchased from a Ginnie Mae MBS if the borrower successfully completes a three-month trial period under a policy shift to align with the FHA version of the Home Affordable Modification Program. Ginnie made the announcement on Aug. 26, effective immediately. Before the policy change, loans had to have missed three full payments before qualifying for a repurchase. Issuers can buy out loans that have remained in pools while borrowers made partial payments for at least three consecutive months under an FHA or VA trial payment plan that is a condition to a permanent modification, Ginnie explained. “Until the loan has been...