Ginnie Mae is following its own path in exploring potential changes to servicer compensation, a project that parallels the Federal Housing Finance Agency’s Joint Initiative on Fannie Mae/Freddie Mac servicing compensation. As part of the FHA’s effort to improve default servicing, Ginnie Mae and other government housing agencies will be working separately to develop better claims mechanisms and pooling services as well as clearer risk and warranty delineations to improve the value of securitizations, the FHFA said. In a discussion paper, the FHFA, which oversees Fannie Mae, Freddie Mac and the Federal Home Loan Banks, said ...

Redwood Trust issued its second non-agency MBS of the year this week with just one rating, a sign of dramatic change in the role of credit ratings in the market. During the heyday of the non-agency MBS market, very few public deals went to market without at least two ratings and some transactions were rated by all three of the top credit rating services. Standard & Poor’s was the market leader for years, but Fitch has had a virtual monopoly on the jumbo MBS sector, which totals just two deals so far this year. S&P has effectively taken to the sidelines in rating non-agency MBS backed by new mortgages, according to...

Recent proposals by the Securities and Exchange Commission could eliminate or impose more regulatory burden on mortgage real estate investment trusts and complicate securitizations, experts warned. The SEC earlier this month launched a preliminary effort to reconsider the exemption that REITs currently have from the Investment Company Act. Although the agency did not propose any specific changes, the REIT industry and its supporters see the initiative as a potential game-changer for how they do business. The SEC concept release, at first blush, appears to “signal impending regulatory burdens for mortgage REITs and to...

Redwood Trust is set to issue a non-agency mortgage-backed security backed by $375.2 million in jumbo mortgages, marking the issuer’s – and the mortgage market’s – second new jumbo deal this year. Fitch Ratings is giving a AAA rating based on its new tougher standards, though it remains unclear whether another service will rate the transaction. A presale report issued last week by Fitch noted the strong characteristics of Redwood’s Sequoia Mortgage Trust 2011-2. ...

The outstanding supply of home-equity loans in the market declined further in the second quarter of 2011, hitting its lowest level in almost six years, but there are signs that the HEL market is at least stabilizing. The Federal Reserve reported a balance of $904.4 billion of home-equity lines of credit and closed-end second mortgages outstanding as of the end of June, down 2.3 percent from the first quarter and 9.2 percent lower than a year ago. The vast majority of the HEL market is on the books of banks, thrifts and credit unions, which collectively held $827.7 billion in portfolio. Finance companies, some of them owned by... [Includes two data]

Securitization participants and financial services providers flatly rejected a proposal to create an independent federal board that would assign credit rating agencies to initially rate non-agency MBS, ABS and other structured finance transactions. In separate comments, two industry trade groups and Fitch Rating Services opposed the proposal, which is being studied by the Securities and Exchange Commission. The Dodd-Frank Act instructs the SEC to study the concept and report back to Congress by July 2012 with its recommendations for regulatory or statutory changes. The idea of establishing a board to oversee credit rating agencies and address...

Standard & Poor’s and Fitch Ratings have announced separate ratings of two new non-agency MBS over the past two weeks, making a little noise in the long slumbering non-agency MBS market. Fitch this week released a presale report on Redwood Trust’s next prime jumbo transaction, while S&P rated a securitization of seasoned subprime mortgages that drew flak because it got higher grades than the agency gave the U.S. government. The new Redwood transaction, Sequoia Mortgage Trust 2011-2, looks a lot like the company’s last issuance back in February. It’s backed by $375 million of squeaky-clean prime jumbo mortgages, most of which were originated by...

The ongoing debate over the need for a government guarantee to sustain the benefits of the to-be-announced MBS market moved this week to the Senate Housing, Banking and Urban Development Committee, where researchers covered both sides of the issue for a group of lawmakers who aren’t likely to act on their counsel any time soon. “Proponents of privatization ignore that the jumbo market does benefit from a government guarantee indirectly in multiple ways,” said Adam Levitin, professor of law at Georgetown University. “The jumbo market has long aped the standards set by the [government-sponsored enterprises] in the conforming market, including...

The Senate Banking, Housing and Urban Affairs Committee may not be moving any closer to a decision on reforming the mortgage finance system, but lawmakers should be getting well versed in the various analytic perspectives on the role of the federal government. At a hearing this week, the committee heard testimony from researchers who support winding down Fannie Mae and Freddie Mac as soon as possible and others who say private capital won’t be drawn back into the system unless there is a government guarantee. “There’s absolutely no reason to believe that private capital would immediately step-up – even if it would eventually...

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...