Credit rating agencies appear to be more generous in rating structured finance products over other bond types because they tend to bring in more revenue, according to a recent study by academics. Researchers at Indiana University, American University and Rice University said that, contrary to assertions by the top credit rating agencies, asset classes are not equal when it comes to ratings. The study “Credit Ratings Across Asset Classes: A=A?” claims there is overwhelming evidence that structured products, such as MBS, receive significantly higher, more optimistic ratings than those assigned to bonds issued by...

Mortgage banking profits rebounded in the third quarter of 2011 as loan production levels began to climb, according to a new ranking and analysis by Inside Mortgage Trends. A representative sample of 15 major mortgage lenders revealed aggregate net income from mortgage banking activities rebounded back into positive territory after thudding to a whopping loss in the previous quarter. The group posted aggregate mortgage banking income of $4.72 billion in the third quarter, compared to a combined $11.40 billion loss in the previous three-month period. The group’s massive second-quarter loss was largely...(Includes one data chart)

It has been four years since fault lines in the subprime market sent tremors through the rest of the mortgage industry and three years since the global collapse of financial markets, but lender behavior today remains driven by fear. Originators ask themselves three questions in the current market, said William Rayburn, CEO at mortgage technology provider FNC, during a panel session at the ABS East conference sponsored last week by Information Management Network. Lenders want to know whether the application will close – it costs them money if it can’t – and whether they can sell the loan if it closes, he said. Just as important...

Consumers who shop for their mortgages online are increasingly of a higher overall credit quality, and their approach to shopping online is growing more sophisticated, according to a new benchmarking study by Mortgagebot LLC. And that raises the ante for mortgage lenders that want to compete in cyberspace, said officials at the Mequon, WI-based information technology provider. The three most significant take-aways for lenders from the new survey have to do with growing borrower sophistication (and the resultant increase in customer expectation), the lender rate of online technology adoption and what online mortgage lending experts call...

Overwhelmed by the tidal wave of foreclosures and under intense scrutiny by lawmakers and regulators, the mortgage industry and default servicers in particular are being challenged like never before to keep up with complex, ever-changing compliance rules and they are in dire need of a technology solution to keep up with the changes. Compliance technology vendors such as Irvine, CA-based DecisionReady are striving to keep up with the demands of their clients, who may not exactly know what they want but know they need a solution that keeps them connected and on top of the latest legal and procedural changes, according to...

Wells Fargo accounted for a whopping 26.1 percent of home mortgages originated during the third quarter, and when you throw in the production numbers for other kingpins in the industry it’s hard to see how small lenders survive. But beneath the gaudy market shares of the Wells Fargos and JPMorgan Chases of the world stand hundreds of small originators – mortgage brokers, community banks, credit unions and old-school independent mortgage bankers – that feed them a significant amount of business. The key to finding success under the shadow of the industry giants is developing a speciality, usually coupled with an obsession for...

A niche FHA mortgage insurance program could become a significant tool to help address the massive inventory of real estate owned, and soon-to-be REO, that continues to weigh on the housing market, some industry observers say. The FHA 203k program was designed to help borrowers who want to purchase a “fixer-upper” home. Started back in 1978, the program insures long-term loans that include both the purchase and rehabilitation of the property. But in 1996, the Department of Housing and Urban Development put a moratorium on issuing 203k loans to private investor-owners, citing instances of fraud and abuse and the inability to...

The Standard and Poor’s/Case-Shiller Home Price Indices for October saw “a modest glimmer of hope.” The indices, which track the price-path for single family homes in 20 national urban centers, saw a 0.2 percent increase from August for the 10- and 20-city composites. Home prices are still lower than they were at this time in 2010 in most cities, Detroit (2.7 percent) and Washington DC (0.3 percent) being the only two markets to post positive annual returns. However, according to David Blitzer, S&P’s chairman of the index committee, 16 of 20 cities and both composites saw their annual rates of change improve in...

The U.S. Senate voted late last week to approve an amendment to a federal spending bill that was offered by Sens. Bob Menendez, D-NJ, and Johnny Isakson, R-GA, to reinstate the higher loan limits for Fannie Mae, Freddie Mac and the Federal Housing Administration that expired on Sept. 30. Those limits dropped to $625,500 in a number of high-cost markets on Oct. 1, and would be restored to $729,750 through December 2013 under the Menendez/Isakson amendment. The National Association of Home Builders was pleased.

Buyback risk is raising costs throughout the mortgage industry and causing lenders to boost cred-it standards beyond the levels required by investors, according to several experts at last week’s annual convention of the Mortgage Bankers Association. “The industry is spending hundreds of millions of dollars in repurchases and defending repurchases,” said David Stevens, chairman and CEO of the MBA. At a time when lenders are being pushed to “keep skin in the game,” a 5 percent risk-retention requirement for securitization might almost seem like a better deal than the costly repurchase process, he added. Brian Chappelle said...