This week’s abrupt, last-minute postponement of a much-anticipated markup of a Senate housing finance reform draft bill effectively doomed the prospects of the legislation making it to a floor vote, note industry observers. The delay came amid continued progressive dissatisfaction with the legislation and an increasingly bold effort by advocates to keep Fannie Mae and Freddie Mac alive. Senate Banking Committee Chairman Tim Johnson, D-SD, and Ranking Member Mike Crapo, R-ID, announced to a packed committee chamber that they would delay consideration of S. 1217 in order “to build a larger coalition of support.”

Several big banks are in various phases of negotiation with the federal government to resolve alleged violations of federal and state securities laws in connection with legacy non-agency MBS. Bank of America is in new settlement talks with the Department of Justice over residential MBS backed mostly by faulty loans stemming from BofA’s acquisition of Countrywide Financial Corp. and Merrill Lynch & Co., which securitized the loans and sold the bonds to investors. The tentative talks could cost...

Concerns about the functionality of the to-be-announced market and potential incentives for riskier lending have prompted some to suggest that legislation under consideration in the Senate to reform the government-sponsored enterprises should remove the capital markets option for risk sharing and rely solely on a guarantor model. A number of agency MBS participants aren’t too pleased with the suggestions and have countered that a capital markets option is necessary in the country’s housing finance system. Under the capital markets option envisioned in the GSE reform bill from Sens. Tim Johnson, D-SD, and Mike Crapo, R-ID, investors would hold...

The housing finance reform legislation authored by Sens. Tim Johnson, D-SD, and Mike Crapo, R-ID, will result in higher guaranty fees and less cross-subsidization than the current Fannie Mae and Freddie Mac fee structure, according to the government-sponsored enterprises. The Johnson-Crapo bill, which was abruptly pulled from a scheduled markup before the Senate Banking, Housing and Urban Affairs Committee this week, would establish a new type of MBS with an explicit government backstop that requires private capital to absorb the first 10 percent of losses. “There is...

There’s a growing concern among participants in the secondary market that legislation in the Senate to reform the government-sponsored enterprises won’t be able to allow the to-be-announced market to function. The latest anxieties were raised by officials at Fannie Mae and Freddie Mac, whose securities flourish in the TBA market. Legislation in the Senate from Sens. Tim Johnson, D-SD, and Mike Crapo, R-ID, calls for the preservation of the TBA market but doesn’t provide any roadmap for how the proposed Federal Mortgage Insurance Corp. should accomplish that feat. “Unless the FMIC sets...

Still, April MBS issuance by Fannie Mae and Freddie Mac fell short of the anemic $47.0 billion issued in January of this year.

Additional industry layoffs are likely in the months ahead. In the first quarter, all lenders originated just $235 billion in mortgages. It was the weakest production quarter in 14 years.

The first-quarter high-LTV refi market was down 37.1 percent from the fourth quarter and off a hefty 79 percent from the $51.4 billion of business the two GSEs did back in the first three months of last year.

Although the Johnson-Crapo housing finance reform bill has little chance of becoming law this year, comments on the legislation submitted to the Treasury Department by the Federal Housing Finance Agency strongly suggest that the current regulator of the government-sponsored enterprises wants its reincarnation to have expanded oversight powers. Industry officials, lobbyists and executives tracking the bill note that if the FHFA has its way, the new Federal Mortgage Insurance Corp. will become a supervisor of nonbanks that originate loans slated for securitization. Currently, the FHFA serves...

Major contributors to the jumbo MBS include New Penn Financial with a 25.5 percent share, Prospect Mortgage and Prospect Lending with a combined 20.4 percent share and Quicken Loans with a 15.5 percent share.