It would take a significant increase in interest rates to diminish bank demand for holding originations of jumbo mortgages in portfolio, according to industry analysts. Analysts at Bank of America Merrill Lynch said higher interest rates could eventually shift the economics in favor of banks securitizing their jumbo production and buying back the AAA tranches of the mortgage-backed securities rather than owning the whole loans on their balance sheet. “While it is tough to ...

The FHA has issued temporary guidelines to ease the condominium approval process and increase the number of condo projects eligible for FHA financing. The guidelines take effect immediately and will be in place for one year to give FHA enough time to write and implement a more comprehensive rule. With the issuance of the guidelines, FHA anticipates an increase in the pool of FHA-eligible condo projects, which in turn will provide more affordable housing options for first-time and low- to moderate-income borrowers. The interim guidelines modify three key areas where lender complaints have been common. First, the guidelines revise requirements for recertification of condo projects. FHA-approved condo projects require recertification after two years to ensure that the project is still in ...

Thanks to declining interest rates and higher prepayment speeds in the third quarter – especially on Ginnie Mae receivables – several publicly traded nonbanks were forced to write down the asset value of their mortgage servicing rights, causing millions of dollars in red ink. According to a review by Inside Mortgage Finance of the earnings statements of six nonbanks, the combined servicing markdown was an ugly $448 million. The group includes Nationstar Mortgage, Ocwen Financial, PennyMac Financial Services, PHH Corp., Stonegate Mortgage and Walter Investment Management Corp., the parent of Ditech Financial. Walter took...

loanDepot Inc. this week priced its much anticipated initial public offering, valuing its soon-to-be-listed shares – 34.5 million units in total – at $18 each or roughly $621 million, a lofty valuation for a company that owns just over $20.9 billion in mortgage servicing rights. Few in the industry are questioning loanDepot’s explosive growth since its inception five years ago, but eyebrows have been raised about the anticipated size of the deal. “It’s...

Promoting affordable housing by recapitalizing Fannie Mae and Freddie Mac is the premise of a new study released this week by the Brookings Institution arguing that their conservatorship should come to an end. Obama administration officials have previously rejected such proposals. The paper noted that the Treasury Department’s sweep policy, which takes the bulk of Fannie’s and Freddie’s profits, limits the government-sponsored enterprises’ ability to promote homeownership and expand access to affordable home ownership, especially among low-income households. Robert Shapiro, former Brookings fellow, and chairman of Sonecon, LLC, along with Elaine Kamarck, a senior fellow at Brookings, said...

When it comes to trading in agency MBS, Deutsche Bank is heading for the exits as a lack of volume in a once-thriving profit center continues to head south. Granted, Deutsche’s departure from the space is part of a huge worldwide restructuring at the German-based bank, but with MBS trading volume falling to a 13-year low last year – and not looking much better this year – the decision was likely an easy one. Chris Whalen, senior managing director at Kroll Bond Rating Agency, said...

Freddie Mac and Fannie Mae both reported third quarter earnings this week but the numbers were in stark contrast to one another. Freddie announced a $475 million loss and set off a firestorm of reaction surrounding a possible Treasury draw when its reserves decline to zero. Two days later, Fannie posted net earnings of $2.2 billion for the third quarter. Freddie pointed to losses on derivatives used to hedge the company’s interest rate risk as the reason for its first loss in four years. In addition to falling interest rates, Freddie marked down its investment in derivatives by $4.17 million. Don Layton, Freddie’s CEO, noted that earnings volatility “stems from our usage of derivatives to...

Most publicly-traded companies reported declining net earnings from their mortgage banking operations during the third quarter of 2015, according to a new Inside Mortgage Trends analysis. A diverse group of 34 major mortgage lenders that includes most of the top lenders and servicers posted a combined $3.56 billion in income from their mortgage banking activity during the third quarter. That was down 25.8 percent from the second quarter of 2015. The declining profitability was...[Includes one data table]

It remains to be seen whether the mortgage servicing market actually grew in the third quarter of 2015, but it’s clear that distribution within the industry continued to shift. The top 50 mortgage servicers had a combined portfolio of $7.300 trillion, including whole loans in portfolio and mortgage servicing rights, at the end of September, according to a new ranking and analysis by Inside Mortgage Finance. That was down 0.2 percent from total servicing held by the top 50 companies at the end of the second quarter. The final word on mortgage debt outstanding comes...[Includes two data tables]

Fannie Mae and Freddie Mac reported a combined $1.485 billion in net income for the third quarter of 2015, a hefty 83.1 percent decline from the previous period. While Fannie reported its 15th consecutive profitable quarter ($1.96 billion in net income), Freddie posted its first loss ($475 million) in four years. Don Layton, Freddie’s CEO, said that earnings volatility “stems from our usage of derivatives to hedge interest rate risks and accounting mismatches associated with the activity. This quarter showed a continuation of that volatility as the accounting mismatch produced a negative $1.5 billion [generally accepted accounting principles] earnings, which was enough to tip us into the comprehensive income loss of about $500 million for the quarter. “Utilizing a derivatives hedging strategy can result...