A task force of state insurance regulators has agreed to require insurers to set aside additional capital to cover risks tied to residential and commercial MBS in an effort to buffer the industry from losses in the event of a severe downturn. The National Association of Insurance Commissioners’ Valuation of Securities Task Force voted 11-2 to support a proposed increase in the NAIC’s capital requirements for U.S. life insurers. The change in capital requirements is driven by year-end NAIC modeling assumptions related to RMBS and CMBS. The change raises...

Fannie Mae and Freddie Mac continued to trim their retained holdings of MBS and unsecuritized mortgages during the third quarter, but at a slower pace than in previous periods, according to an analysis by Inside MBS & ABS of earnings reports released this week by the two government-sponsored enterprises. One of the conditions of the conservatorships the GSEs entered four years ago was that they would reduce their retained mortgage portfolios by 10 percent a year. Those terms were revised in August to include a 15 percent annual wind-down, which would take each GSE’s investment portfolio down to $250 billion by the beginning of 2018, four years sooner than under the previous arrangement. As Freddie noted...[Includes one data chart]

The United States just concluded an electoral campaign season that involved the expenditure of billions of dollars and resulted in no change in the balance of power on the federal level, beyond strengthening Democrats’ control in the U.S. Senate. But that doesn’t mean nothing important is going to happen over the next four years. Securitization industry officials, Washington insiders, political observers and policy wonks all expect hard financial realities to compel policymakers into responding to a host of issues that will significantly affect housing finance and securitization. “We don’t think the ‘status-quo election,’ as some have called it, means status quo for residential mortgage finance,” said Karen Shaw Petrou, a managing partner at Federal Financial Analytics, a Washington, DC, think tank. She thinks...

MGIC Investment Corp. announced last week it has reached a tentative agreement with Freddie Mac “on substantially all terms of a settlement” of a simmering and prolonged dispute over pool insurance between the mortgage insurer and the government-sponsored enterprise. If MGIC and Freddie are able to agree on matters “significant to final resolution” involving payments to be made to the GSE, it would resolve a coverage dispute that threatened to prevent the MI from backing some loans. “The principal economic terms concerning the amount of payments in settlement of MGIC’s obligations under the policies at issue have been...

The Consumer Financial Protection Bureau has found “significant non-compliance” during its examinations of mortgage lenders, compelling them to take a variety of steps deemed necessary to be brought into compliance, according to the CFPB’s first report on its examination findings. Violations under the Real Estate Settlement Procedures Act included failures to make proper and complete disclosures to consumers of costs and other terms because of errors in the good faith estimate and HUD-1 settlement statement, the CFPB stated. Truth in Lending Act violations included...

Mortgage market watchers should expect “business as usual” from a second Obama administration as the White House and Congressional Democrats are poised to preserve gains under the Dodd-Frank Act, including the Consumer Financial Protection Bureau. Both parties say they want to resolve the conservatorships of the government-sponsored enterprises, but experts say the necessity of addressing budget and tax issues will trump all other considerations next year. “Clearly a second term for the Obama administration would be business as usual as best they can,” explained Timothy McTaggart, partner at the Pepper Hamilton law firm during a pre-election webinar. “I don’t think Dodd-Frank will remain sacrosanct for all time. I think during a second term the [regulatory] agencies will get past the point of having to put the rules out, they will get some feedback and they will start making it known where they see gaps or deficiencies.” Karen Shaw Petrou, managing partner of Federal Financial Analytics, said...

Fannie Mae and Freddie Mac this week reported a combined $4.74 billion in net income during the third quarter, as the two government-sponsored enterprises avoided taking further draws from the Treasury Department by staying in positive earnings territory. The GSEs’ combined third-quarter income was down 41.7 percent from the previous three-month period, mostly because Fannie’s net income fell 64.6 percent from second-quarter earnings that were pumped up by a $3.04 billion recorded benefit on credit losses. Fannie’s $1.81 billion in third-quarter net income was much more in line with the $2.72 billion it earned in the first three months of the year, as well as Freddie’s recent performance. Freddie reported...

Fannie Mae and Freddie Mac this week directed servicers to inform homeowners reeling from the damage inflicted by Hurricane Sandy that they may be eligible for a temporary reprieve on their mortgage payments. The GSEs’ announcement reiterated their policy on mortgage relief to borrowers located in jurisdictions that the president has declared to be major disaster areas.

The Federal Housing Finance Agency recently issued an updated strategic plan in which the FHFA outlines the next phase of conservatorship for the GSEs, Fannie Mae and Freddie Mac. The FHFA’s plan establishes “restrictions and expectations” for the GSEs, which have been under government conservatorship since September 2008, but the agency does not manage the day-to-day operations of the two companies. Just like the draft document first submitted to Congress earlier this year, the FHFA’s updated Strategic Plan: Fiscal Years 2013-2017 sets four broad goals for the Finance Agency: safe and sound housing GSEs; stability, liquidity, and access in housing finance; preserve and conserve the GSEs’ assets; and prepare for the future of housing finance in the U.S.

The Federal Housing Finance Agency can and should impose greater transparency standards on Fannie Mae and Freddie Mac given the two GSEs’ linchpin role in the mortgage market today, according to the head of the Mortgage Bankers Association. MBA President and CEO David Stevens at the association’s annual convention in Chicago two weeks ago called for the Finance Agency – as GSE conservator – to require Fannie and Freddie to comply with public notice and comment rules before the GSEs impose new rules on the real estate finance industry. Taxpayer-supported Fannie and Freddie, along with Ginnie Mae – a wholly owned government corporation within the Department of Housing and Urban Development – currently backstop some 90 percent of all new mortgages.