Both the Federal Housing Finance Agency and Freddie Mac are refuting a published report suggesting that a mortgage finance vehicle at one time employed by the government-sponsored enterprise was designed to profit the company by preventing homeowners from refinancing. An article published this week by ProPublica and National Public Radio contended that Freddie stood to profit from hedging investments known as inverse floaters that would pay higher returns if interest rates rose and more homeowners remained in mortgages with high interest rates. According to ProPublica, Freddie purchased inverse floaters...

MBS trustees are facing challenges on a number of fronts, according to panelists at the American Securitization Forum’s ASF 2012 conference last week in Las Vegas. Issuers are counting on trustees to provide new information required by the Securities and Exchange Commission, communications with the rating services have become strained, and municipalities are looking to require property maintenance on abandoned homes. Under the Dodd-Frank Act, the SEC now requires ABS issuers to disclose the three-year history of the repurchase requests they’ve received – including those withdrawn and those disputed...

Federal and state enforcement agencies late last week launched a broad new initiative to investigate and develop litigation on fraud and misconduct in the non-agency MBS market, issuing civil subpoenas to 11 financial companies. The RMBS Working Group is being co-chaired by five officials: two assistant attorneys general in the Justice Department, the head of enforcement at the Securities and Exchange Commission and state attorneys general from New York and Colorado. Some 55 DOJ officials are participating, including 15 attorneys and 10 Federal Bureau of Investigation agents, with 30 more attorneys...

While a major regulatory concern of the past few years – the risk-retention rule – has yet to be resolved, the industry is squaring its shoulders for new challenges: the so-called Volcker Rule, a proposal on conflicts of interest in securitization and new bank capital requirements regarding market risk. These projects could do “enormous or irreparable damage to the industry, and entire sectors of the industry could be lopped off,” said Tom Deutsch, executive director of the American Securitization Forum, during the ASF conference last week in Las Vegas. Only about one eighth of the regulatory requirements...

The Obama administration late last week announced that it is extending its Home Affordable Modification Program for another year and sweetening the inducements to get investors to agree to principal reduction loan mods. MBS analysts generally grade the changes as a positive for the non-agency MBS market, but the impact on Fannie Mae and Freddie Mac securities may depend on whether the government-sponsored enterprises agree to principal reductions. The revised HAMP program will now be available for investor-owned mortgages, and it will feature a revised debt-to-income calculation taking into...

The non-agency portion of the Home Affordable Modification Program is set for significant changes, according to an announcement last week by the Treasury Department. Investors will receive greater incentives for principal reduction mods, eligibility requirements for HAMP will be loosened and the program will be extended through the end of 2013. “Implications for agency MBS investors seem limited but are very meaningful for non-agency investors,” said analysts at Barclays Capital. Incentive payments to loan owners will triple for principal reduction HAMP mods. Previously, the payments ranged from six cents-on-the-dollar to 18 cents-on-the-dollar ...

The Department of Justice announced last week that it will increase the number of attorneys, analysts, agents and investigators looking into unlawful activities regarding mortgage-backed securities. The emphasis on MBS was directed by President Obama and is part of a new working group involving the DOJ, federal regulators and a number of state attorneys general. The DOJ, Department of Housing and Urban Development, Securities and Exchange Commission and state attorneys general led by New York AG Eric Schneiderman formed the Residential Mortgage-Backed Securities Working Group under the existing Financial Fraud Enforcement Task Force ...

With the recent issuance of streamlined regulations on lender indemnification, mortgagees participating in the FHA Lender Insurance program may increasingly find themselves the targets of HUD enforcement actions. Industry compliance experts anticipate an increase in agency audits and monitoring reviews because of the Department of Housing and Urban Development’s tightening of its indemnification rules. This could raise lenders’ compliance costs as well as legal costs if they find themselves the subject of an enforcement action, experts warned. “At an unprecedented time of change in the mortgage industry ...

The Department of Housing and Urban Development has announced a new regulation prohibiting lenders from using sexual orientation or gender identity as a basis for determining borrower eligibility for FHA-insured mortgage financing. The regulation specifically extends federal anti-discrimination protections to lesbians, gays, bisexuals, transgender persons and their families when applying for HUD-assisted or HUD-financed rental housing or an FHA-insured mortgage loan. The regulations will become effective 30 days after their publication in the Federal Register. HUD Secretary Shaun Donovan said the policy will ...

The National Association of Realtors recently asked the Department of Housing and Urban Development to allow investors to participate in the FHA’s property rehabilitation program. The FHA’s 203(k) Rehabilitation Mortgage Insurance Program allows homebuyers to take out a mortgage to purchase a house, including the cost of its rehabilitation. The program also allows the current owners to finance the rehabilitation of their own homes. Currently, investors and cooperative units are barred from using the 203(k) programs. Individual condominium units may be insured if ...