Attorneys representing non-agency mortgage-backed security issuers suggest fighting repurchase-request lawsuits to narrow the claims and eventually settling such lawsuits. Jason Halper and Martin Seidel, partners at the law firm of Cadwalader, Wickersham & Taft, said reducing the claims can help lead to a better settlement for issuers. “You can very often narrow the case substantially,” Seidel suggested this week during a presentation by the State Attorneys General Enforcement Network. Among other issues ...

With an increasing amount of PennyMac Mortgage Investment Trust’s revenue coming from correspondent originations, some have questioned how much longer the company will remain a real estate investment trust for tax purposes. Officials at the company said the REIT status remains beneficial, though they are considering other options. REITs must distribute at least 90 percent of their taxable income to their shareholders each year and generally are not subject to federal or state income taxes. REITs also face limitations ...

Berkshire Hathaway became the lead bidder for Residential Capital’s loan portfolio this week while Nationstar Mortgage remained the stalking horse bidder for ResCap’s mortgage servicing rights and origination platform. ResCap’s parent company Ally Financial was previously the top bidder for ResCap’s loan portfolio. Auctions for the MSRs, origination platform and loan portfolio are expected in October. An investigation by the Consumer Financial Protection Bureau helped a borrower receive a ... [Includes two briefs]

A new secondary market policy announced by Wells Fargo last week is sending ripples across the industry and could potentially cause the FHA Streamline Refinance program to falter in the coming weeks. Major FHA lenders have quietly adopted similar policies as FHA refinance volume, fueled by increased streamline refi business, more than doubled over the week. Wells Fargo raised eyebrows by announcing it will do FHA streamline refis only on loans in its own servicing portfolio and will not accept streamline refis from third-party originators. The top FHA producer in the first quarter of 2012 said focusing on ...

The Federal Housing Finance Agency should address Fannie Mae and Freddie Mac’s representation and warranties repurchase demands with an eye toward making the two government-sponsored enterprises’ buyback policies more transparent, industry groups say. The volume of repurchase demands by the GSEs continues at “unprecedented levels” as Fannie and Freddie made nearly $100 billion in repurchase demands over the past three years, the Mortgage Bankers Association said in a comment letter on the FHFA’s strategy for GSE conservatorship. “MBA supports lender reps and warrants as an effective method of...

Fannie Mae demonstrated measurable progress during 2011 while conditions at Freddie Mac neither worsened nor improved significantly but both GSEs have ample room for improvement, according to a report issued this week by the Federal Housing Finance Agency. The FHFA’s fourth annual Report to Congress deemed the two GSEs “critical supervisory concerns” last year with “continuing credit losses” coming primarily from loans originated during the years 2005 to 2007. The report identified “key challenges facing each company, including the ongoing stress in the nation’s housing markets, the challenging economic environment and the uncertain future facing the enterprises,” noted the FHFA. “However, management and the boards were responsive throughout 2011 to FHFA’s findings and challenges and took appropriate steps to begin resolving identified issues.”

Mortgage companies reported strong gains in income from loan production and secondary marketing activity during the first quarter of 2012, according to a new Inside Mortgage Trends analysis of earnings reports filed by nine major lenders. Although the servicing business remained profitable during early 2012, income was down slightly from the fourth quarter of last year. All nine companies reported increased earnings on loan production and secondary marketing. As a group, they generated $4.84 billion in income from these activities, up 76.9 percent from...(Includes one data chart)

The FHA Mutual Mortgage Insurance Fund, which has been below the levels mandated by Congress for the past two years, appeared to come under more pressure in the first quarter of 2012. The Department of Housing and Urban Development reported that total capital resources available to the MMIF declined by $1.0 billion to $32.3 billion as of the end of March. Total MMIF capital has hit lower marks over the past two years – it fell to $31.6 billion in the first quarter of 2011 – but the fund’s total exposure has been climbing steadily. HUD reports the financial health of the MMIF only at the end of its fiscal year...

With an enormous volume of unresolved mortgage buyback demands continuing to hang menacingly over the industry’s head, vendor providers are hustling to develop viable solutions to help lenders get a handle on the risk and reduce their liability. The latest case in point is a new Quality Control Service for Correspondents from Melbourne, FL-based ISGN Corp., which provides end-to-end technology solutions and services to the U.S. mortgage industry. The company’s new offering is aimed at correspondent lenders with warehouse lines of credit, and it reviews and assesses all quality control points in...

A working paper authored by two Federal Reserve Bank of New York economists found that refinancing can be “fruitfully employed” as a tool for loss mitigation by investors and lenders. In their paper, “Payment Changes and Default Risk: The Impact of Refinancing on Expected Credit Losses,” Fed economists Joseph Tracy and Joshua Wright found that the relationship between borrowers’ monthly payments and future credit performance is important for the design of an initiative such as the Home Affordable Refinance Program. The authors used a competing risk model to estimate the sensitivity of default risk...