Foreign investors are the leading purchasers of Ginnie Mae MBS and may reinvest next year only in Ginnies for “safety” and to prepare for new tougher rules on capital and liquidity under the Basel III accord, according to analysts. Foreign investors currently hold $620 billion of the $3.45 trillion in U.S. MBS, and half of that is Ginnie Mae MBS. JPMorgan Securities analysts expect the Ginnie share of foreign MBS holdings to increase in 2012. They also expect U.S. banks to increase their Ginnie Mae purchases. Purchases by overseas investors, with an extra...(Includes one data chart)

Commercial banks reported a robust $4.91 billion in mortgage banking earnings during the third quarter of 2011, according to a new analysis of bank call report data by Inside Mortgage Trends. Mortgage banking income was up 52.8 percent from the three months ending in June, reaching the industry’s highest level since the end of 2009. Despite the improvement, year-to-date mortgage banking earnings were still down 4.8 percent from the first nine months of 2010. The surge in mortgage banking earnings resulted from increased loan origination and secondary market activity. Banks reported...(Includes one data chart)

A proposed radical shift in how lenders are paid for servicing Fannie Mae and Freddie Mac mortgages would make the business less feasible and skew the competitive landscape even more than it is, according to the Mortgage Bankers Association. In a comment letter to the Federal Housing Finance Agency, the MBA said the regulator and the two government-sponsored enterprises ought to shelve their controversial plan to reform servicing compensation. The FHFA and the GSEs have focused on two alternatives: a fee-for-service model favored by the agencies, and an industry proposal to reduce the...

The number of settlement problems as an overall percentage of market closings has increased in past months as on-time settlements plunged to 47 percent from 65 percent, according to the latest survey by the National Association of Realtors. Respondents to a monthly NAR survey cited problems with obtaining mortgages along with appraisal and inspection problems as causes of settlement delays and cancellations. The inability to obtain a mortgage was reported by 9 percent of respondents in October as causing a settlement cancellation, up from 4 percent in September. Asked whether they had any problems in...

This week, the Mortgage Bankers Association announced it was bringing the Mortgage Industry Standards Maintenance Organization back into its fold after a more than two-year stint with Mortgage Electronic Registration Systems Inc., a move likely to benefit the mortgage lending industry at large as well as the three participating entities. Management of MISMO transferred back to the MBA on Dec. 1, 2011, under the terms of a deal announced back in September by MERSCorp. and the MBA. “MERSCorp successfully managed MISMO during an important period of technical and technological development for...

Some large banks may be re-thinking their commitment to the mortgage business and creating opportunities for a number of mid-sized firms, according to analysts at FBR Capital Markets. Servicing problems and mounting repurchase demands have pushed some large banks to allocate less capital to mortgage banking and slowed their originations, FBR analysts said. “This has created an opportunity for smaller players to step up and fill the void while still attaining healthy margins,” the company added. FBR specifically pointed to PHH Mortgage, U.S. Bank, Quicken Home Loans, Provident Funding, BB&T and...

Home prices remain under stress. The CoreLogic Home Price Index shows that home prices have decreased 1.3 percent from September to October, making it the third consecutive month in which home prices have been on a downward slide. Looking at it from a wider scope, national home prices (including distressed sales) have decreased 3.9 percent from Oct. 2010 to Oct. 2011. Excluding distressed sales, Oct. 2011 posted a 0.5 percent yearly decline. States in the best shape, when including distressed sales, are West Virginia, with 4.8 percent price appreciation; South Dakota, with 3.1 percent...

The combined holdings of residential MBS by banks and thrifts topped the $1.5 trillion mark for the first time ever during the third quarter, as depository institutions without a lot of great alternative investment options continued to plow money into the market. Banks and thrifts held a record $1.533 trillion in residential MBS at the end of September, up 2.8 percent from the previous quarter and 10.4 percent ahead of the same period in 2010. Banks and thrifts held a combined 23.2 percent share of the outstanding residential MBS in the market. The biggest...(Includes two data charts)

The chief of enforcement at the Securities and Exchange Commission took issue with a U.S. District Court judge’s rejection this week of the agency’s proposed $285 million settlement with Citigroup over a collateralized debt obligation backed by MBS that went sour, and defended the deal as the best available course of action, given the restrictions under current law. Robert Khuzami, director of the SEC’s Division of Enforcement, responded to a ruling announced early this week by U.S. District Court Judge Jed Rakoff in Manhattan in which the judge rejected the multi-million-dollar...

Settlements regarding non-agency mortgage-backed securities are starting to increase as industry analysts suggest that the agreements limit the future liability faced by issuers. Bank of America and the Royal Bank of Scotland recently reached separate non-agency MBS settlements. At the end of October, BofA quietly settled with investors – including the Public Employees’ Retirement System of Mississippi – in 18 non-agency securities issued by Merrill Lynch. The settlement price was not disclosed but was reportedly $315.0 million. ...