Mortgage banking profits remained at very high levels during the second quarter of 2012, although about half the top lenders that have reported results so far said their income was down from the first three months of the year. In many cases, robust production income was offset by persistently high repurchase expenses. A new Inside Mortgage Trends analysis of earnings reports from 21 banks with significant mortgage banking operations revealed...[Includes one data chart]

Compliance management, consumer complaints, fair lending and unfair, deceptive business practices will receive the most scrutiny during supervisory exams of large banks and nonbank financial institutions, according to the Consumer Financial Protection Bureau. Lenders should reevaluate their current policies and procedures for consumer protection even before they are selected for a comprehensive audit by the CFPB, suggested Allison Brown, program manager for mortgage supervision within the bureau’s Office of Nonbank Supervision. Penalties for noncompliance are unclear but noncompliant institutions will be required...

Subsidiaries of Nationstar Mortgage Holdings announced last week that they intended to sell $100 million in senior notes to help fund future acquisitions and transfers of servicing portfolios, including the potential acquisition of certain servicing assets from Residential Capital. The notes were sold this week in a private placement. The notes are a “follow-on” issue to $275 million in senior notes the company issued in April, due in 2019. Nationstar said the additional notes were issued at an offering price of 105.500 percent, they have an effective yield of 8.396 percent and carry a coupon of 9.625 percent per annum, payable semi-annually in arrears, beginning in November 2012. In May, Nationstar announced that it would pay...

A “bad bank” entity for pooling and standardized restructuring and resecuritization of underwater mortgages may be the best bet for the housing market to pull itself out of the negative equity quagmire of the last several years, according to a proposal by a Georgetown University law professor. In his white paper – Clearing the Mortgage Market Through Principal Reduction: A Bad Bank for Housing RTC 2.0 – Adam Levitin makes the case that the best option for “clearing the market” lies via “negotiated, quasi-voluntary principal reduction” using a privately funded Resolution Trust Corporation-style entity. “Such an RTC 2.0 would provide a framework for implementing ‘quasi-voluntary’ principal reductions in the context of litigation or regulatory settlement or the federal government’s exercise of its secondary market power to exclude...

Fannie Mae and Freddie Mac have adopted a “common language” to improve and help ease lenders’ delivery of loans and appraisals to the government-sponsored enterprises. The GSEs’ full adoption of the Uniform Loan Delivery Dataset (ULDD) on July 23 establishes a common usage and standardizes most of the data required at the time of loan delivery, minimizing differences wherever possible. Freddie Mac hailed the new system as a “critical milestone” of the Uniform Mortgage Data Program, a joint GSE initiative to provide...

Narrower spreads on new investments and rising prepayments could dampen earnings in the second quarter of 2012 for most residential mortgage real estate investment conduits (REITs) that invest in mortgage-backed securities, according to a new report from Keefe, Bruyette & Woods research. During the quarter, the Fannie Mae 30-year current coupon fell nearly 50 basis points from the prior quarter as a result of a 57 bps drop in the yield on a 10-year Treasury note. Dividends, a generally good indicator of profitability, either have been flat or down modestly, the KBW report noted. On a brighter note, while the government-sponsored enterprises’ monthly data showed...

California, Arizona, Nevada and Florida – the so-called Sand States that have seen the most severe declines in house prices – were at the head of the line as Fannie Mae and Freddie Mac removed loan-to-value limits under the Home Affordable Refinance Program earlier this year. Refinance mortgages with loan-to-value ratios exceeding 125 percent accounted for just 2.5 percent of HARP business in the first quarter, as the government-sponsored enterprises just got started buying such loans for cash. A securitization option for these loans only became available in June. But 13.1 percent of HARP loans in Nevada were...[Includes one data chart]

Are tough appraisal standards putting the brakes on rebounding home prices in many parts of the country? Yes, but in areas where cash transactions account for close to half of all residential purchases home prices are climbing at an alarming rate that indicates the potential for regional housing bubbles. These are some of the major findings contained in the June results of the Campbell/Inside Mortgage Finance HousingPulse Tracking Survey. The big news in the housing market these days is the rebound...

In the aftermath of the collapse of the financial markets and the resulting recession, there has been a good deal of anxiety and concern that large, critical components of the U.S. and global finance markets may be vulnerable to exploitation by so-called shadow banking institutions and other entities that may be less regulated than major retail and investment banks. But such fears may be overblown, new research from the Federal Reserve Bank of New York suggests. “Financial intermediation has evolved over the last few decades toward shadow banking. With that evolution, the traditional roles of banks as intermediaries between savers and borrowers are increasingly performed by more specialized entities involved in asset securitization,” said Nicola Cetorelli and Stavros Peristiani, two researchers at the New York Fed. However, their research, drawn upon data from 1983 to 2008, has shown...

The vast majority of repurchase requests on mortgages in non-agency mortgage-backed securities were in dispute in the first quarter of 2012, according to an Inside Nonconforming Markets analysis of Securities and Exchange Commission 15Ga disclosures. However, industry analysts expect settlements to increase during the second half of this year. Securitizers reported $29.03 billion in mortgages in non-agency MBS with repurchase demands in the first quarter of 2012, with 98.6 percent of the volume classified as in dispute ... [Includes one chart]