The Treasury Department’s surprise announcement late last week that it will now “sweep” up any and all future profits from Fannie Mae and Freddie Mac in lieu of the dividends the GSEs had been paying in return for taxpayer support solves some problems but creates new ones, industry observers say. Rather than continue to borrow from the Treasury to make dividend payments to the Treasury – as the GSEs have since they were placed in conservatorship in September 2008 – the revised preferred stock purchase agreements will replace the 10 percent quarterly dividend with a “full income sweep” of “every dollar of profit that each firm earns going forward,” according to Michael Stegman, counselor to the Treasury for Housing Finance Policy.

Mortgage bankers reported a downturn in loan production income during the second quarter that was offset partly by improved results from their mortgage servicing businesses, according to a new Inside Mortgage Trends analysis of earnings reports. A group of nine major lenders that collectively accounted for 62.6 percent of total home loan originations during the second quarter posted a combined $4.11 billion in mortgage production income for the three-month period. That was down 15.0 percent from ... [Includes one chart]

Banks reported a modest decline in mortgage banking income during the second quarter of 2012, but the business continued to generate strong profits, according to a new analysis of call report data by Inside Mortgage Trends. Commercial banks, thrifts and bank holding companies reported a total of $7.91 billion in non-interest income from single-family mortgage banking activity during the second quarter. That was down 0.8 percent from the first three months of the year, but it still ranked ... [Includes one chart]

Historically low mortgages rates have fueled a prolonged refinancing wave that helped provide lenders with an important revenue source during the financial crisis. But as refinancing activity wanes and home prices begin to stabilize, lenders need to plan for the coming purchase market to stay competitive and continue growing revenue. In this regard, St. Louis-based Mortgage Returns helps mortgage companies, banks and independent mortgage banks prepare for the transition to a purchase-driven business ...

Plans to hasten the resolution of Fannie Mae and Freddie Mac through an amended preferred stock purchase agreement (PSPA) announced last week by the Treasury Department and the Federal Housing Finance Agency has elicited mixed responses from stakeholders. Views vary as to whether the new deal will actually benefit taxpayers or simply protect holders of government-sponsored enterprise debt. The revised agreement will speed up the reduction of both GSEs’ investment portfolios, from an annual rate of 10 percent to ...

Lenders won a number of concessions from the Consumer Financial Protection Bureau last week when the regulator proposed rules for loan originator compensation. However, the proposal also includes significant provisions that would impact lender profitability and originator compensation. For firms currently offering compensation arrangements that would be prohibited by the proposal, the CFPB said its proposed prohibition on compensation based on transaction terms “may contribute to adverse selection ...

Nationstar Mortgage Holdings posted strong profits for the second quarter of 2012 due to the company’s expanding servicing portfolio and refinances of loans in the portfolio. The nonbank had $36.3 million in net income for the quarter even after taking a $20.9 million decrease in the fair value of its mortgage servicing rights. “The primary driver of profitability continues to be servicing performance,” said Jay Bray, CEO of Nationstar, during a call with investors last week to announce the company’s earnings ...

Chimera Investment announced that it will restate three years of earnings and take large hits to net income and other-than-temporary impairment losses due to accounting on non-agency mortgage-backed securities. The real estate investment trust has been working for more than a year to apply proper accounting guidance to its $4.41 billion in non-agency MBS holdings. “As a result of applying the correct generally accepted accounting practices guidance to our investments in non-agency residential mortgage-backed securities ...

Standard & Poor’s last week updated its criteria for ratings on non-agency mortgage-backed securities with collateral originated before 2009. The standards update criteria for credit, cash flows and rating stability and apply immediately. The rating service said the changes will result in more downgrades than upgrades. This week, S&P placed 16,872 ratings from 3,364 securities with a par amount of $253.95 billion on CreditWatch. About 70.0 percent of the ratings are on watch for potential downgrades ... [Includes three briefs]

Chase Home Finance knocked Bank of America off its second-place perch and joined top-ranked Wells Fargo as the dominant Ginnie Mae mortgage-backed securities issuers in 2012, according to the Inside Mortgage Finance Database. Together, Wells Fargo and Chase accounted for 53.3 percent of the $100.6 billion Ginnie Mae MBS market in the second quarter of 2012, which grew 24.4 percent from the first quarter and a whopping 42.2 percent from the same period a year ago. Wells led with $42.6 billion and a commanding 42.2 percent piece of the Ginnie Mae MBS market, thanks to ... ( 2 charts)