Mortgage company owners hoping to go public or tap the capital markets for another round of equity financing may have to temper their expectations in the new interest rate environment. But that doesn’t mean initial public offerings are out of favor with investors. According to industry experts, it’s a matter of expectations. “Some people are saying these deals won’t happen now,” said Paul Miller, a top analyst at FBR Capital Markets. “But I’m not in that camp. Any deal that is priced correctly will sell.” Miller told...

Beginning Jan. 1, capital requirements for bank holdings of certain non-agency mortgage-backed securities will begin to increase. The changes were included in the Basel III reforms approved by federal banking regulators last week. The Basel III final rule includes the simplified supervisory formula approach in lieu of the use of credit ratings to determine capital requirements for holdings of non-agency MBS. The SSFA relies on the 90+ delinquency rate, risk weights of the underlying exposures ...

The Department of Veterans Affairs has urged holders and servicers of home loans with a VA guaranty to consider principal reduction when evaluating a distressed loan for possible modification. In a recent circular, the VA noted that it is not able to reimburse any principal reduction because a VA claim is payable only upon termination of a loan, and any forgiven amount is no longer part of the borrower’s mortgage debt. However, principal reduction in a loan modification may produce a higher expected return for a servicer than termination of the loan, the VA said. This is especially true when the sum of the ...

The Department of Housing and Urban Development is adopting the mortgage banking industry’s data standards format for the FHA’s TOTAL Mortgage Scorecard, which HUD uses to evaluate the credit risk of FHA loans that are submitted through an automated underwriting system. The standards were developed by the Mortgage Industry Standard Maintenance Organization (MISMO), a nonprofit subsidiary of the Mortgage Bankers Association. MISMO is an open data standards group that promotes consistency among mortgage transaction participants to reduce loan processing costs, increase transparency, and ultimately ...

Ginnie Mae guaranteed more than $216.9 billion in mortgage-backed securities during the first half of 2013, up 18.8 percent from the same period last year. Issuance was also up 8.0 percent in the second quarter from the first quarter, according to an Inside FHA Lending analysis of Ginnie Mae data. Not surprisingly, a significant share – $132.8 billion – of Ginnie Mae MBS issuances over the six-month period were backed by FHA loans. VA accounted for $72.1 billion while Rural Housing Service loans totaled $10.5 billion. Ginnie Mae issuances dropped during the first quarter but surged in the second quarter as ... [1 chart]

The mortgage banking industry recently declared victory in the wake of a federal appeals court decision to overturn a previous court ruling, which had upheld a 2010 administrative interpretation by the Department of Labor that mortgage loan officers are entitled to overtime pay. In Mortgage Bankers Association v. Seth D. Harris, acting secretary of U.S. Department of Labor, a three-judge panel from the U.S. Court of Appeals for the District of Columbia reversed a lower court’s decision denying the MBA’s motion for summary judgment. At the same time, the appellate court remanded the case to the district court with instructions to vacate the DOL’s 2010 interpretation of the administrative exemption under the Fair Labor Standards Act (FLSA). The court, however, left...

Mortgage banking and brokerage firms are about to start laying off production workers as refi applications continue to decline, but industry executives say the heaviest layoffs are unlikely to come until the end of summer. That’s when lenders begin closing mortgages that first entered the pipeline in May, when the application picture was brighter. According to figures compiled by the Bureau of Labor Statistics, the mortgage banking and brokerage sectors employed 293,800 full-time workers in May, compared to 295,500 in April, a loss of 1,700 positions. Compared to a year ago, employment is up 10 percent. The brokerage sector alone employed...

Fannie Mae and Freddie Mac saw a marked decline in refinance business during the second quarter of 2013, but a strengthening housing market helped offset some of the lost volume. The two government-sponsored enterprises securitized $256.0 billion of single-family refinance loans during the second quarter, according to the Inside Mortgage Finance GSE Seller Profile, a quarterly statistical report based on loan-level, mortgage-backed securities disclosures. That was down 13.6 percent from ... [Includes two data charts]

Mortgage banking remained highly profitable during the first quarter of 2013, but the hefty margins earned in secondary market activity declined and production volume tapered off, according to the Mortgage Bankers Association’s quarterly performance report. The average firm participating in the survey generated $3.65 million in pretax income during the first quarter, off 22.5 percent from the previous period, the MBA said. That was still well above the $2.33 million in average earnings for the ...

To implement sustainable cost reductions, lenders and servicers should address four critical elements, according to analysts at PricewaterhouseCoopers. PWC said executives addressing consumer lending costs should develop a strong foundation, create breathing space, look at the system as a whole and embed a cost-conscious culture. “To create sustainable reductions in cost requires a comprehensive review of the organization, its strategic positioning and the underlying ...