In tandem with its efforts to build a common securitization platform, the Federal Housing Finance Agency provided an update on its progress in developing a single security for the GSEs last week. “The single-security project is intended to improve the overall liquidity of Fannie Mae and Freddie Mac mortgage-backed securities, and lower costs for borrowers and taxpayers,” said the FHFA. The recent update primarily focused on the decisions it made based on the 23 response letters it received and dialogue the agency had with industry leaders after initiating a request for input last year. While representatives from the Federal Home Loan Banks suggested that the FHLBank system become an eligible issuer of single securities, the FHFA declined that proposal.
The Federal Housing Finance Agency this week unveiled final eligibility rules for nonbank servicers, codifying minimum capital and liquidity ratios for the industry along with a host of standards that owners of servicing rights must meet. All the requirements take effect December 31 of this year. In particular, the mandates, on the surface, might look burdensome to smaller shops that aren’t used to extensive audit requirements pressed upon them by Fannie Mae and Freddie Mac. The surveillance and “best practices” guidelines cover a host of areas, including such things as servicing transfers, and how the servicer (or servicing agent) manages its call center. Smaller shops, to some extent, are thrown a bone in the final rules.
The Federal Home Loan Bank system earned $1.015 billion in the first quarter of 2015, according to figures compiled by the system’s Office of Finance, an 82.6 percent increase when compared to the same quarter in 2014. The sharp increase was primarily the result of higher gains on litigation settlements, according to the Office of Finance. Litigation settlements accounted for $480 million in gains for the three months ending on March 31. The OF said the bulk of it was “driven by the FHLBank of San Francisco’s $450 million settlement of certain claims arising from investments in private-label mortgage-backed securities.” Total FHLBank assets for the first three months of the year were down at $879.9 billion, a 3.7 percent decrease from...
The Federal Housing Finance Agency continues to mull over the decision on whether to ban captive insurance firms owned by real estate investment trusts from the system. The agency received 1,300 comment letters on the controversial proposal and Mel Watt, FHFA’s director, was vague last week on when a final decision would be made. “FHFA is continuing to evaluate the comments we received and we will come to a resolution as quickly as we can prudently do so,” he said during the Federal Home Loan Banks Directors Conference in Washington. Last year, Watt raised safety and soundness concerns about captive insurers borrowing and joining the FHLB system. Some regulators are concerned that REITs and other financial...
Although the trial between the Federal Housing Finance Agency and Nomura Holdings is over, Nomura said that it is planning an appeal. The Japanese-based investment bank was found financially liable last week when Federal Judge Denise Cote ruled the bank knowingly sold bad mortgage-backed securities to the GSEs ahead of the 2008 financial crisis. The FHFA is working to put a dollar amount on the damages that Nomura and RBS Securities, the underwriter of four of the seven securitizations at issue, should pay. Nomura spokesman Jonathan Hodgkinson, said in a statement that losses by Fannie Mae and Freddie Mac resulted from an unprecedented decline in home prices. However, that defense approach failed. According to Cote “given the magnitude of falsity, it’s not surprising that the defendant...
U.S. Mortgage Insurers Supports GSE Risk-Sharing. The USMI wrote a letter this week to Sen. Richard Shelby, R-AL, in support of Shelby’s regulatory relief bill, which calls on the GSEs to engage in front-end risk sharing transactions. “This directive would make greater use of private capital to “de-risk” the GSEs, lower the exposure and costs for the enterprises and taxpayers and should lower costs to borrowers,” the trade group said. Fannie Names Winning Bidders of First NPL Sale. Fannie Mae unveiled the winning bidders on its first-ever sale of non-performing mortgages last week: SW Sponsor LLC and PRMF Acquisition, the latter of which is an affiliate of Neuberger Berman Fixed Income Funds. The GSE...
Economists at the Federal Housing Finance Agency published a paper last week detailing a model that could be a better gauge of how low house prices can fall than models used before the financial crisis.“Leveraging a model based upon consumer and investor incentives, we are able to explain the depth of housing market downturns at both the national and state level over a variety of market environments,” the economists said. The economists noted that their model is dynamic, which is more useful than the static models used by the predecessor to the FHFA, which “proved insufficiently stressful in the lead up to the Great Recession.” A model based on a static shock can produce an insufficient level of stress ...
According to analyst Paul Miller of FBR Capital Markets, the standards are meant to “impact small, nonpublic, nondepository institutions that have operated on the periphery of the sector.”
Housing is showing some traction, but heavy regulation and enforcement continue to weigh on the mortgage market, according to analysts at this week’s secondary-market conference sponsored by the Mortgage Bankers Association in New York. Charles Gabriel, president of Capital Alpha Advisors, said there are some green shoots in the mortgage market, including signs of more home sales. But he characterized it as “a mature market that is suboptimized.” Lenders have paid massive penalties in lawsuits, he added, and there is no sign that they will expand the credit box. “U.S. Bank was asked...
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