Could rising interest rates and a shake-up in the repo market cause some real estate investment trusts that specialize in the MBS market to dump securities en masse? A new report from Fitch Ratings notes that repurchase agreements represent 90 percent of agency mortgage REIT liabilities. “In a deleveraging scenario, MBS investors reliant on repo borrowing may need to liquidate some of their holdings,” writes Fitch analyst Robert Grossman and his team. If that happens it might create what Fitch calls a “knock-on” effect for MBS valuations and the mortgage market in general. The cash provided via repo lines is...
Credit Suisse and Shellpoint Partners decided to damn the torpedoes and issue a total of three non-agency jumbo MBS at the end of the second quarter of 2013 despite concerns about investor appetite. The Shellpoint MBS was a proof-of-concept affair, while at least one of the Credit Suisse deals appears to be aimed at unloading seasoned originations from one lender. The three deals totaled $1.10 billion. Analysts at Bank of America Merrill Lynch said...
New MBS and ABS issuance slowed in the second quarter of 2013 as rising interest rates in June stalled the market’s momentum. A total of $495.4 billion in residential MBS and non-mortgage ABS were issued during the second quarter of 2013, according to a new Inside MBS & ABS market analysis. That was down 3.7 percent from the first quarter of the year, although total production during the first half of 2013 was still up 17.8 percent from the same period last year. June was...[Includes one data chart]
The Federal Reserve Board of Governors unanimously issued a revised Basel III final rule this week that abandons the proposed changes to the risk-weighting of residential mortgages, but presses ahead with the proposed new treatment of mortgage servicing rights. In backing off the proposed changes for residential mortgages, Fed officials cited community bank concerns about the complexity of calculating loan-to-value ratios under the proposed regime. They also emphasized concerns about the unknown interaction the proposed changes would have with other mortgage-related rulemakings confronting the industry, most notably the Consumer Financial Protection Bureau’s “qualified mortgage” standard as well as the qualified residential mortgage definition, which is still in development by federal regulators. “In light of new regulations designed to improve the quality of mortgage underwriting as well as continued uncertainty regarding the aggregate impact of pending mortgage-related rulemakings, the draft final rule does not include...
A high percentage of FHA-insured mortgage loans were deemed unacceptable after a post-endorsement review performed by the FHA revealed material defects that apparently went undetected at the time the loans were approved, according to the Department of Housing and Urban Development. In a recent report by HUD’s Office of Lender Activities and Program Compliance, 44 percent of 6,251 single-family mortgage loans that underwent post-endorsement loan reviews in the first quarter of 2013 were found initially unacceptable. Under the FHA’s three-tier rating system, loans are rated as “conforming,” “deficient” or “unacceptable.” The review found...
Well, at least the White House is happy. Fannie and Freddie turned over $66.4 billion to the government at the end of June, money that will help reduce the deficit.
The Federal Reserve will go ahead with proposed rule changes related to mortgage servicing rights, but with what it calls a “lengthy transition period.”
The silver lining in the 2Q numbers is a strengthening home-purchase market. Fannie and Freddie securitized $81.7 billion of home-purchase mortgages during the second quarter, their highest quarterly volume since the second quarter of 2009.
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