MBS Business Surges in 1Q 2012 Due to RefiGSE single-family securitizations leapt 16.2 percent during the first three months of 2012 compared to the previous quarter as mortgage lenders delivered some $303.9 billion in home loans to Fannie Mae and Freddie Mac’s securitization programs, according to an Inside The GSEs analysis. The first quarter’s flood of new business marked the fourth straight quarterly increase in production of GSE mortgage-backed securities after the market tanked in the second quarter of 2011.

Fannie Mae and Freddie Mac’s combined cash infusion from taxpayers during the latter half of 2011 came in significantly below estimates forecast by the GSEs’ conservator, according to a new report. The Federal Housing Finance Agency’s fourth-quarter conservatorship report noted that Fannie and Freddie’s actual combined draw during the second half of last year was $19 billion, some $10 billion below the Finance Agency’s most optimistic projections issued last fall. In October, the FHFA circulated its updated projections of the financial performance of the GSEs, including potential draws under the Senior Preferred Stock Purchase Agreements with the Treasury Department.

Almost half of lenders believe that strategic defaults will increase in 2012, a specter that continues to affect national housing policy. There are no reliable data regarding strategic defaults in the U.S., considering the secrecy inherent in the act. That has forced policymakers to make dollars-and-cents decisions based on conjecture about borrower behavior. A new FICO survey found that 46 percent of bank risk professionals expect the number of strategic defaults in 2012 to surpass those in 2011. Survey participants had a generally pessimistic view of homeowners’ regard for their mortgage...

Lenders should expect at least a short-term boost in profits from the Federal Housing Finance Agency’s recent tweaks to the Home Affordable Refinance Program, analysts say as the industry’s largest lenders have seen a big increase in new refinance applications for HARP 2.0. In its first-quarter earnings report issued last week, Chase cited the impact of HARP in part for generating $1.6 billion in mortgage production revenue, an 80 percent increase from a year earlier. Likewise, Wells reported first-quarter mortgage originations to be up $9 billion from the fourth quarter of 2011, with 15 percent of originations credited to HARP, while application volumes rose 20 percent during the same period.

Mortgage banking operations owned by commercial banks posted a significant increase in loan sales during the fourth quarter, helping to push earnings higher. Bank mortgage banking units sold a total of $299.0 billion of single-family mortgages during the fourth quarter, up 20.2 percent from the previous three-month period. It was the industry’s second quarterly increase in sales volume after sinking to just $227.0 billion during the second quarter of last year. For the full year, mortgage sales came in 14.4 percent below the level reported during 2010, and the banking...(Includes one data chart)

The Mortgage Bankers Association has asked Fannie Mae to push back its June 1 implementation deadline of the GSE’s new requirements for lender “force-placed” insurance policies to allow time for the creation of a “workable timeline” for compliance. Last month, Fannie announced it would implement changes to its Lender-Placed Insurance requirements by overseeing the force-placed polices itself instead of allowing banks and other financial institutions to do so.

The Federal Housing Finance Agency should give consideration to creating a mechanism to allow small mortgage lenders to more easily appeal GSE repurchase demands, according to one U.S. senator.In a letter sent last week to FHFA Acting Director Edward DeMarco, Sen. Jeanne Shaheen, D-NH, said several of her small-business constituents have noted a “sharp increase” in repurchase demands over the last year.

Fannie Mae and Freddie Mac have reluctantly directed their servicers to begin making payments next month in compliance with Chicago’s vacant property ordinance “under protest” as the GSEs’ conservator continues to fight the local legislation in court. Starting May 1, Fannie servicers will be required to include a written protest along with the ordinance’s $500 registration fee, according to a letter to servicers issued earlier this month. “All payments made to the city of Chicago, including vacant property registration payments, must be made ‘under protest’ by sending a written communication to the city with the registration fee,” explained Fannie. “This written communication must note that the Federal Housing Finance Agency determined that the registration fee does not apply to Fannie Mae, and that the registration fee is therefore paid under protest.”

Mortgage lenders closed a record $28.31 billion in mortgages with Veterans Administration home loan guaranties during the first quarter of 2012, breaking the previous all-time high set in the fourth quarter of last year. VA lending has been going gangbusters over the past few years as FHA’s market share has gradually declined. In 2011, the VA program provided more new primary mortgage insurance coverage than the private MI industry for the first time ever since the birth of the private MI business. In 2011, the VA accounted for 22.0 percent of the primary MI market, and 26.0 percent in the...(Includes one data chart)

Lenders should expect at least a short-term boost in profits from the Federal Housing Finance Agency’s recent tweaks to the Home Affordable Refinance Program, analysts say, but HARP 2.0’s long-run effectiveness to the pool of underwater borrowers remains an open question. Since January, the industry’s largest mortgage servicers, including Wells Fargo and JPMorgan Chase, have seen a significant uptick in new refinance applications for HARP 2.0. “This quarter should be one of the strongest quarters for mortgage banking we’ve seen in quite some time,” said FBR Capital Markets’ Paul...(Includes one data chart)