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...

The unpaid principal balance on VA loans securitized in 3Q15 Ginnie Mae mortgage-backed securities totaled $426.9 billion, up 5.1 percent from the previous quarter and 17.3 percent more year-over-year. Wells Fargo serviced $114.4 billion of VA collateral at Sept. 30, 2.0 percent up from the prior quarter. It was good enough for a commanding 26.8 percent of the market. The only other megabank among the top five servicers in this segment was fifth-place Chase Home Finance, which closed the quarter with $16.8 billion and a 3.9 percent market share. It saw portfolio declines on both quarterly and year-over-year bases. USAA Federal Savings Bank, in third place, accounted for $24.1 billion, or 5.6 percent of the VA-backed MBS servicing market. Nonbanks PennyMac, in second place, and fourth-ranked Freedom Mortgage combined for 11.0 percent of the ... [ 1 chart ]

Servicing of FHA loans pooled into Ginnie Mae mortgage-backed securities rose 2.1 percent in the third quarter of 2015. Three megabanks in the top five-servicer tier accounted for a significant share of the market. Ginnie Mae servicers of FHA collateral reported $969.0 billion outstanding at Sept. 30, with Wells Fargo accounting for 27.9 percent of total servicing volume. Wells Fargo, Chase Home Finance (#2) and Bank of America (#5) combined to service 39.3 percent of FHA outstanding as of the end of the quarter. PennyMac Corp. closed the quarter with a $57.7 billion FHA servicing portfolio, good enough for third place and 6.0 percent of the market. Fourth-ranked NationStar Mortgage reported a $53.6 billion servicing portfolio at the end of the ... [ 1 chart ]

Community lenders renewed their call for a further cut in FHA mortgage insurance premiums amid speculation that a healthier FHA insurance fund could lead to another reduction. But analysts are less optimistic about another premium reduction for different reasons. In a letter to FHA Acting Commissioner Edward Golding, the Community Home Lenders Association asked that the annual MIP be reduced to the pre-crisis level of 0.55 percent when FHA’s capital reserve ratio returns to the statutory 2.0 percent level. The call comes less than a month before FHA issues its highly anticipated annual actuarial report on the state of the Mutual Mortgage Insurance Fund. There is speculation within the mortgage industry that the FY 2015 report will show improved FHA fundamentals, bringing the fund closer or over its statutory 2.0 percent capital reserve ratio. The report is expected to highlight the positive results of a ...

The California Housing Finance Agency is planning to add VA loans to its list of mortgage programs, with an offer of downpayment assistance. Kenneth Giebel, CHFA director of homeownership, said the agency plans to have a VA loan program in place in early 2016 to complement other first-mortgage programs. In addition, the agency is considering adding the U.S. Department of Agriculture’s guaranteed single family home loan program to its current product menu. Currently, the CHFA is working with the California Department of Veterans Affairs (CalVet) in providing home loans to qualified veterans and servicemembers. There are 31 military installations located throughout California, home to nearly 2 million veterans. A CalVet VA loan utilizes a veterans’ or service member’s VA eligibility and provides 100 percent financing. The department also has a Fannie Mae 97 loan-to-value ratio product, which ...