Fannie Mae and Freddie Mac mortgage-backed securities remained the preferred investment choice of the 12 Federal Home Loan Banks during the second quarter of 2014, with a very slight decline from the previous quarter, according to a new analysis and ranking by Inside The GSEs based on data from the Federal Housing Finance Agency. Meanwhile, Ginnie Mae securities posted an increase within the FHLBank system during the three-month period ending June 30, 2014.

MBS industry observers had hoped that federal banking regulators would clear up any confusion about the treatment of collateralized mortgage obligations and real estate mortgage investment conduits when they finalized new liquidity coverage ratio rules last week. The regulators gave some hints, but did not spell out a position. The rubber will meet the road when examiners start going over individual banks’ portfolios for compliance with the LCR rule, which requires banks to maintain sufficient quantities of highly liquid assets to meet their cash needs in a financial emergency. The final rule classifies...

The few real estate investment trusts that currently have access to advances from the Federal Home Loan Banks would lose their ability to tap the attractive funding source under a proposal last week from the Federal Housing Finance Agency. The FHFA said the proposed rule is necessary because REITs with captive insurance companies pose risks to the FHLBank system. “FHFA is taking these actions to address supervisory concerns about certain institutions that are ineligible for FHLBank membership, but that are using captive insurers as vehicles through which they can obtain FHLBank advances to fund their business operations,” the federal regulator said.

The Federal Housing Finance Agency appears to be all alone – for now – in its effort to prevent nonbanks from gaining access to the Federal Home Loan Bank system by using a captive insurance affiliate. The proposal would also change FHLBank membership rules for depository institutions. But already the proposed ban – issued for a 60-day comment period early last week – is coming under heavy fire from different factions of the mortgage industry, including the Council of Federal Home Loan Banks, real estate investment trusts and private-equity firms that own REIT stock. David Jeffers, executive vice president for the Council, said “widespread calls” for the comment period to be extended are...

The pushback has already begun against a proposed rule by the Federal Housing Finance Agency that ban new captive reinsurers from joining the 12 FHLBanks. The proposal – issued this week for a 60 day comment period ending Nov. 1 – would also ease captive reinsurers of the FHLBanks over several years “to ensure that members maintain a commitment to housing finance and that only eligible entities can gain access to Bank advances and the benefits of membership.”

The FHA will no longer allow lenders to charge interest payments previously owed beyond the date the FHA mortgage was paid in full – a policy change that could help borrowers save some money. Currently, lenders can charge interest on FHA loans through the end of the month when they are paid off. The new rule is effective for loans paid off on or after Jan. 21, 2015. The policy change responds...

Last week’s announcement by the Federal Home Loan Bank of Atlanta that it would participate in the Mortgage Partnership Finance program, which is managed by the FHLBank of Chicago, “closes the circle” by ensuring that all 12 FHLBanks now are part of a mortgage securitization program, according to an industry observer. …

Weighed down by high premium costs and lender overlays, FHA lost more primary market share to private mortgage insurers and the Department of Veterans Affairs during the second quarter of 2014. Although June’s FHA endorsement numbers have not yet been released, the trend seen in April through May, along with Ginnie Mae securitization data, suggest that FHA business was up a modest 11.5 percent from the first quarter. But that increase provides no comfort to FHA, which saw its market share go down to 33.7 percent, a six-year low. From April to May, FHA forward endorsements rose by 2.4 percent to $10.61 billion. On a year-over-year basis, however, endorsements were down from $21.9 billion in May 2013, according to an Inside FHA Lending analysis of agency data. On the other hand, private MI companies reported a total of $44.19 billion of new insurance written (NIW) during the ... [2 charts]

The Federal Home Loan Bank of Des Moines and the Federal Home Loan Bank of Seattle jointly announced that they have entered into merger discussions, but don’t expect a rash of FHLBank consolidations regardless of the outcome, says an expert. The two institutions “entered into an exclusivity arrangement regarding a potential merger,” the two FHLBanks announced last week. The proposed merger of the FHLBank of Des Moines and the smaller, troubled FHLBank of Seattle would create an institution with more than 1,500 member financial institutions in 13 states and three U.S. territories in the Pacific Ocean.

Freddie Announces 9th Multifamily Securities Offering of 2014, K-F04. Freddie Mac announced this week a new offering of Structured Pass-Through Certificates or K Certificates, backed exclusively by LIBOR-based, floating-rate multifamily mortgages with five- and seven-year terms. The GSE expects to offer approximately $1.2 billion in K Certificates, which priced on Aug. 6 and is expected to settle on or about August 25. This is Freddie’s ninth K Certificate offering this year. The GSE said it also reached an important milestone of securitizing more than $80 billion in multifamily mortgages through its K-Deal program.