The American Bankers Association sent a letter to Secretary Treasury Steve Mnuchin late last month detailing a handful of key reforms it believes are needed to the ability-to-repay/qualified mortgage rule promulgated by the CFPB. The trade group’s correspondence was in response to President Trump’s Executive Order 13772 and the circulation of his core principles for regulating the U.S. financial system.For starters, the ABA said all mortgages originated and held in a bank’s own portfolio should be considered QM, and should be afforded safe harbor legal treatment. “This approach is consistent with safe lending principles because holding loans in portfolio means that the bank is retaining 100 percent of the risk on that loan,” said the organization. Banks will offer ...
Capital Alpha projects that the “emerging reform thrust” might emulate ideas promulgated by the Mortgage Bankers Association, which is adamantly opposed to recap and release.
Some $247.0 billion of subprime mortgages were outstanding at the end of the first quarter of 2017, according to estimates by Inside Nonconforming Markets.
A surging home-purchase market helped boost new single-family business volume at Fannie Mae and Freddie Mac in May, according to a new ranking and analysis by Inside The GSEs.Together, the two companies issued $62.03 billion of single-family mortgage-backed securities in May, an unspectacular 6.3 percent increase from April. In fact, May’s volume was the second lowest monthly production of the year. But that’s because the early months of 2017 were still heavy with refinance business. Purchase-mortgage business at Fannie and Freddie was up a solid 15.5 percent from April, hitting $36.78 billion, tops so far in 2017. Meanwhile, Fannie and Freddie securitized just $23.98 billion of refinance loans in May.
Two major organizations, the Bipartisan Policy Center and the American Bankers Association, have both weighed in on GSE reform in recent weeks. The Bipartisan Policy Center released a brief late this week focusing on improving access and affordability in housing finance reform that is not dependent on any one structure or future role for the GSEs. It also wants to make sure that the government guarantee remains. “It is this guarantee that forms the basis of the obligation to ensure that the benefits flowing from the government backstop are as broadly available as possible, consistent with safety and soundness and taxpayer protection,” said Michael Stegman, a BPC fellow and author of the paper.
The GSEs had sold more than 72,502 nonperforming loans through December 2016, according to the Federal Housing Finance Agency’s third report highlighting nonperforming loan sales and borrower outcomes. That number is up from the 59,629 NPLs that were sold through August 2016. The report, released this week, is part of the FHFA’s plans to make NPL sales activity more transparent. The agency released its inaugural report last June. The latest report shows that NPL sales totaled unpaid principal balance of $14.2 billion, and had an average current loan-to-value ratio of 97 percent. The average delinquency of pools sold ranged from 1.4 to 6.2 years.
Fannie Mae plans to discontinue selling homes to one of the largest rent-to-own firms as part of a crack down on abusive forms of seller financing. After criticism brewed about abuses with practices such as rent-to-own leases and long-term installment agreements such as contract-for-deed sales, the GSE said it will not sell REO properties to Vision Property, a South Carolina-based firm. The firm has been in operation since 2004 and owns more than 6,000 homes across the country. Vision was highlighted in a New York Times article last year, which noted, “Most tenants walk away with nothing, having sunk money for rent and repairs into homes they had once hoped to own. Others faced surprise evictions.”
Federal Housing Finance Agency Director Mel Watt is worried that the Federal Home Loan Banks are relying too much on short-term funding of long-term assets. He called this a “funding mismatch.” Watt spoke at the FHLBank Annual Director’s Conference last week about the banks’ performance and said they reported strong net earnings of $3.4 billion in the last quarter. However, he also dished on a couple of supervisory priorities and said he was most concerned about a funding mismatch.” Watt acknowledged that changes in the rules on money market funds have been a significant driver of investor appetite for short-term FHLBank paper, but noted that the FHLBanks can’t afford to think it will always be that way.
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