The Federal Reserve is urging government policy makers to consider more aggressive responses to the housing debacle, including a government-backed program to transform much of the real estate owned overhang into rental housing. In a white paper sent to Congress, the Fed suggested that a government-facilitated REO-to-rental program can boost the housing market and improve loss recoveries on REO. Such a program could take many forms, the Fed noted. “The REO holder could rent the properties directly, sell the properties to a third-party investor who would rent the properties, or enter into a joint...

Demands to repurchase poorly performing mortgages have resulted in a spike in the number of mortgage fraud-related Suspicious Activity Reports (SARs) filed by banks in 2011, according to the Department of the Treasury’s Financial Crimes Enforcement Network. In its 2011 annual report, FinCEN said increased buyback demands by investors have forced large mortgage lenders to conduct additional reviews of loans they originated, resulting in higher SARs filings last year. A review of SAR filings in the first quarter of 2011 found that the number of mortgage fraud reports rose to 25,485, up 31 percent from...

“The simple way to think about the long view is that we’re five years through a 10-year transition,” said Fannie Mae Chief Economist Doug Duncan during a housing conference sponsored by Fitch Ratings in New York this week. 2012 will be “the year of the political economy,” Duncan said. While the moniker partially refers to the election for the White House, as well as on Capitol Hill, it also points to the number of political decisions this year that will help to determine financial fortunes. Stateside, this year will see the expiration of a number of business and household taxes, from the payroll tax cut to...

There is a significant difference in foreclosure timelines depending on whether states require judicial foreclosures. The liquidation probability, according to an Amherst Securities analysis, increased greatly in a non-judicial state, like California, versus judicial states like Florida. “We can work our way through the backlog more quickly in non-judicial states,” said Larry Litton, chairman and CEO of Selene Finance. He noted that some judicial states were easier to work with than others, based on whether the legislature was willing to work with servicers. In other areas of the country, servicers...

It started last week with an unsolicited white paper outlining “a framework for thinking about certain issues and tradeoffs that policymakers might consider” and blossomed into a coordinated assault by the Federal Reserve on the housing slump that won’t go away. Having purchased over $1 trillion in mortgage securities in an effort to drive mortgage interest rates to all-time lows, the Fed appears to be using its speechmaking and paper-writing powers to try to get the rest of Washington moving on housing. In addition to the policy paper, Fed officials in the past week have made three speeches on...

Gibbs & Brun, the Houston-based law firm that spearheaded a massive investor lawsuit against Bank of America, has drawn a bead on Wells Fargo. The company announced this week that its non-agency MBS investor clients have asked two trustees – U.S. Bank and HSBC – to investigate whether ineligible mortgages were pooled in some $19 billion of Alt A and jumbo MBS issued by Wells Fargo between 2005 and 2007. Some 48 securitization trusts are covered by the action, and Gibbs & Brun said it represented investors who collectively held over a quarter of the voting rights in those trusts. “Clients...

The Congressionally-mandated increase in the guarantee fees charged by the government-sponsored enterprises and the FHA will not be enough to significantly shift activity to the non-agency market, according to industry analysts. One option for increasing non-agency activity has been an increase in GSE guarantee fees, but the 10 basis point increase approved by Congress in December does not appear to be enough for most products. “The argument that it will encourage homeowners to look for non-GSE/FHA loans is pretty silly and hides the foolishness of using housing to pay for payroll tax cuts,” said Adam Levitin, an associate professor of law at Georgetown University. ...

The group of institutional investors that negotiated a potential $8.5 billion settlement with Bank of America has recently targeted other non-agency mortgage-backed security issuers. The move is the latest development in a number of ongoing claims regarding non-agency MBS. This week, the group led by the law firm of Gibbs & Bruns asked trustees to open investigations on more than $19.0 billion of non-agency MBS issued by Wells Fargo. The investors said they hold more than 25 percent of the voting rights in 48 trusts that issued the non-agency securities between 2005 and 2007. ...

Bank and thrift holdings of home-equity loans declined by 1.8 percent from the second quarter of 2011 to the third, according to the Inside Mortgage Finance Bank Database. HELs continue to demonstrate strong performance as the serious delinquency rate on the $1.20 trillion in holdings was 2.05 percent in the third quarter of 2011. Closed-end second liens accounted for 10.6 percent of bank and thrift total HEL business – which includes unused home-equity loan-of-credit commitments. The $127.2 billion in outstanding CES was down by 4.2 percent from the previous quarter. ... [Includes one data chart]

As a group, commercial banks reported a small increase in the volume of loan repurchases and indemnifications made during the third quarter, but some institutions posted much bigger increases than the overall industry trend. At the same time, a number of banks – including two of the top five – reported declines in the volume of buybacks and indemnifications compared to the second quarter of 2011, according to a new analysis of bank call report data by Inside Mortgage Trends. Bank mortgage repurchases and indemnifications totaled $5.94 billion during the third quarter, up...(Includes one data chart)