There is reason to believe the mortgage banking industry’s record level of profitability may have peaked, as gain-on-sale margins have already begun to slip and more dark clouds appear on the horizon. “Mortgage banks have enjoyed record high gain-on-sale margins over the past several quarters,” analysts at Compass Point Research and Trading noted in a recent market review. They attributed this trend mostly to two primary factors: limited capacity in the mortgage market to handle increased demand and ...

Outside investors poking around the mortgage banking industry for a possible franchise deal first and foremost want the companies they’re courting to have Ginnie Mae approvals. “If you have the Ginnie eagle, it’s golden,” said Chuck Klein, managing director for mergers and acquisitions for Mortgage Banking Solutions. “Retained Ginnie servicing is what it’s all about.” Klein, of course, isn’t...

The Department of Housing and Urban Development has sweetened the pot to encourage more investors to participate in an FHA program for disposing of real estate-owned properties to ease HUD’s housing inventory. HUD announced it is raising the discount for REO properties under its First Look Sales Method to 15 percent from 10 percent. Properties include those that do not meet the standards for FHA insurance. The special program was launched in 2010 to give preference to eligible purchasers under the Neighborhood Stabilization Program (NSP) to ...

Hefty secondary marketing margins continued to boost mortgage banking income at a faster pace than total sales activity during the third quarter of 2012, according to a new Inside Mortgage Trends analysis of bank call report data. Banks and thrifts reported a total of $401.6 billion in sales of single-family mortgages during the third quarter, a hefty 11.5 percent increase from the previous three-month period. But mortgage banking income – which is derived largely from ... [Includes one data chart]

It’s no secret that Fannie Mae and Freddie Mac are back in the black when it comes to earnings, but in the quarters ahead the two are likely to perform even better as delinquencies and foreclosures continue to wane, and they move to recapture some of their massive loss reserves. But another factor could bolster their earnings as well: large legal settlements with the nation’s megabanks, which will go straight to their bottom line, according to an analysis done by Inside The GSEs. As part of Fannie’s buyback settlement with Bank of America (see related story on page 1), Fannie will receive some $3.6 billion in cash from the bank, plus BofA is repurchasing almost $7 billion in legacy loans.

Bank and thrift holdings of home-equity loans declined by 2.5 percent in the third quarter of 2012 compared with the previous quarter, according to the Inside Mortgage Finance Bank Mortgage Database. A significant portion of the holdings remain in a negative equity position, though overall homeowner equity increased in the past year. Banks and thrifts reported $1.11 trillion in total HEL business at the end of the third quarter of 2012, including home-equity lines of credit and closed-end second mortgages held in portfolio, and unused HELOC commitments. The $103.36 billion in CES holdings in the third quarter of 2012 was down 5.8 percent from the previous quarter. Cristian de Ritis, a senior director of consumer credit economics at Moody’s Analytics, said...[Includes one data chart]

Residential Capital, a former subsidiary of Ally and currently in Chapter 11 bankruptcy, has asked the court for permission to sell an estimated $130 million in FHA-insured mortgage loans. ResCap made the request in a recent filing with the U.S. Bankruptcy Court in Manhattan, which monitors and approves all of the beleaguered company’s activities and requests during bankruptcy. According to the company, its unsecured creditors have signed off on the prospective sale of the FHA loans although the court would still have to approve the request during a scheduled hearing on Jan. 16. ResCap sought bankruptcy protection on ...

Ginnie Mae guaranteed more than $109.7 billion in mortgage-backed securities in the fourth quarter of 2012, with Wells Fargo and Chase Home Finance accounting for nearly half of the issuance, according to an Inside FHA Lending analysis of issuer data. Ginnie Mae issuers securitized 9.1 percent more in government-backed mortgages in the fourth quarter than in the previous quarter while issuance was significantly higher year-over-year, rising a whopping 44.8 percent. Although the top five Ginnie Mae issuers combined for 56.6 percent of the quarter’s total Ginnie Mae MBS production (Wells and Chase were on top with a combined 45.8 percent market share), 10 lower-ranked issuers posted ... [1 chart]

The official watchdog of the Federal Housing Finance Agency has pointedly suggested that the GSE regulator direct Fannie Mae and Freddie Mac to determine whether or by how much the two companies were swindled out of billions of dollars as a result of banks’ alleged manipulation of a key interest rate and then determine how to recoup those losses, in court if necessary. A recent unpublished memo by the FHFA’s Office of Inspector General urged the Finance Agency to prepare to file suit against the banks involved in setting the London Interbank Offered Rate after an analysis of the GSEs’ published financial statements and publicly available historical interest data concluded that Fannie and Freddie may have suffered more than $3 billion in losses due to LIBOR manipulation.

Depository institutions managed to trim the volume of mortgage loans they serviced for other investors during the third quarter of 2012, according to a new Inside Mortgage Trends analysis of call report data...[includes one data chart]