If there was any question about what was driving the housing market in 2011, some year-end housing numbers have provided two clear answers: investors and distressed properties. The combination of investors buying up large amounts of distressed properties not only put downward pressure on home prices, but also cut into the home-purchase mortgage business by generating a significant number of cash sales. These are some of the major conclusions that can be drawn from a look at 2011 results from the Campbell/Inside Mortgage Finance HousingPulse Tracking Survey. Last year’s housing...(Includes one data chart)

Mortgage brokers have seen their role in the home loan market significantly diminished in recent years, but they staged a minor comeback in the fourth quarter, according to a new analysis of Fannie Mae and Freddie Mac data by Inside Mortgage Trends. Mortgage brokers originated 12.1 percent of the single-family loans securitized by the two government-sponsored enterprises during the fourth quarter. That was up from 9.8 percent during the previous quarter. It was the strongest broker share of GSE business over the past two years. The surge in broker share paralleled a...(Includes two data charts)

Richard Cordray, the new director of the Consumer Financial Protection Bureau, this week parried with a key House Republican over disclosure of the agency’s regulatory agenda, a lengthy to-do list that was virtually dictated by Congress in the Dodd-Frank Act. “Since the onset of the financial crisis, members of Congress have heard from businesses of all sizes that markets ... need certainty. In this regard, the CFPB has failed the test,” said Rep. Patrick McHenry, R-NC, chairman of the House Oversight and Government Reform Subcommittee on TARP, Financial Services and Bailouts of Public and Private...

With a price tag of $100 billion required to forgive the principal of underwater Fannie Mae and Freddie Mac mortgages, the best bet for the government-sponsored enterprises and for taxpayers is for the GSEs to pursue a policy of principal forbearance, the Federal Housing Finance Agency said. This week, the FHFA released its analysis conducted in 2010 following numerous requests and an eventual threat of subpoena by House Democrats. The agency’s number crunchers found that “principal reduction never serves the long-term interest of the taxpayer when compared to foreclosure.” As of June 30, 2011, Fannie and Freddie...

The Federal Reserve’s recent suggestion that policymakers consider having the government-sponsored enterprises refinance underwater non-agency mortgages appears unlikely to happen, according to industry analysts and even the Fed. Still, the Fed claims such a program would stabilize the housing market and it would likely reduce losses on non-agency mortgage-backed securities. The Fed said the Home Affordable Refinance Program could be expanded beyond GSE loans – or Fannie Mae and Freddie Mac could implement new programs – to refinance non-agency borrowers that would otherwise meet HARP underwriting requirements. According to the Fed, 1.0 million to 2.5 million non-agency borrowers meet HARP refi standards ...

The non-agency MBS market sank to a record low in 2011, with just $27.59 billion in total issuance, although performance has steadied in the dwindling supply of outstanding deals. New issuance of non-agency MBS was down 56.6 percent from the level reached in 2010, ending a three-year string of modest gains. As has been the case since 2008, the vast preponderance of new issuance involved seasoned collateral – either whole loans or repackaged MBS. Over half (52.3 percent) of non-agency MBS issued in 2011 were re-securitizations, yet the volume of such deals was down 75.2 percent from...(Includes two data charts)

There has been little progress in the development of new ways to pay for credit ratings even though researchers have seven proposed systems designed to address the conflicts of interest that have plagued the non-agency MBS market, according to a new Government Accountability Office report. The GAO noted that there were five significant ratings compensation models when it last reported on the subject in 2010, and two more have since been proposed. But the authors of these models have done little additional work to flesh them out, and none has been adopted in the marketplace, the GAO said. “Given that the [rating...

New research is helping foment pervasive rumors about a massive government refinancing of agency-backed mortgages intended to bolster – or replace – the underperforming Home Affordable Refinance Program for underwater Fannie Mae and Freddie Mac borrowers. Earlier this month, industry watchers began to speculate about possible HARP changes following a note by the Washington Research Group’s Jaret Sieberg – picked up by an American Enterprise Institute blog posting – that predicts President Obama will appoint a “housing advocate” to the Federal Housing Finance Agency via a recess appointment. Such an...

Insurance companies will likely increase their investment in non-agency residential MBS, with market and regulatory influences encouraging movement toward hybrid and floating-rate securities as opposed to fixed-rate bonds, according to some top securities industry analysts. The primary driver on the regulatory level is the anticipated slight rise in capital requirements expected to result from a recent action by the National Association of Insurance Commissioners, the association of state insurance regulators. On Dec. 27, 2011, the NAIC released updated pricing designations that...

Principal reduction to ease negative equity situations may have a lot of positive effects for homeowners, but recent research suggests it may have little impact on worker mobility. A forthcoming working paper by Sam Schulhofer-Wohl, of the Federal Reserve Bank of Minneapolis, contends that research showing underwater borrowers are 33 percent less likely to move to better employment markets is flawed because it ignores key data. In an analysis of Census Bureau housing data, Schulhofer-Wohl reached the opposite conclusion, that underwater borrowers are more likely to move, suggesting that principal...