When rates spiked this week, margin calls to MBS investors increased. Lenders are nervous but next will will be the real test, mortgage executives told Inside Mortgage Finance.

Ambac Assurance Corp. may proceed with its fraud claims against JPMorgan Chase in connection with residential MBS that Ambac insured, a New York state judge ruled last week. In March 2012, Ambac filed suit against JPMorgan Chase, alleging fraudulent marketing of residential MBS by Bear Stearns and Co., which was acquired and renamed JPMorgan Securities. The suit claims that Ambac had to pay more than $200 million in insurance claims to investors from seven Bear Stearns securitization transactions that lost $1.8 billion. Ambac contends...

Freddie Mac's "low activity fee" will be mostly eliminated. However, it will still apply to originators that have not sold a loan to the GSE in 36 months.

Wall Street is concerned that the further away a loan is from getting safe harbor protection as a qualified mortgage, the more legal uncertainty and higher costs there will be associated with it.

Representatives of the structured finance industry are worried about the effect the Consumer Financial Protection Bureau’s ability-to-repay/qualified-mortgage rule will have on the revival of the non-agency MBS sector. One of their main concerns right now is that the further away a loan is from getting safe harbor protection as a qualified mortgage, the more legal uncertainty and higher costs there will be associated with it. Last week, analysts at Morningstar Credit Ratings LLC noted that the rule will allow a borrower in the first three years of the mortgage to bring legal action challenging whether the lender determined an ability to repay. If successful, the borrower can be entitled to up to three years of fees and finance charges, actual damages, and legal fees and costs, they said. Additionally, the borrower will be able...

The Mortgage Bankers Association called for the Federal Housing Finance Agency to update standards for representations and warranties provided to the government-sponsored enterprises and asked for more transparent underwriting standards. “Confusion and uncertainty around representations and warranties standards continue to cause lenders to add their own overlays to the existing GSE credit standards,” said Bill Cosgrove, the MBA’s vice chairman. “As a result, lenders are only offering mortgages to those with the most pristine credit for fear that any borrower default will trigger costly repurchase requests.” The MBA detailed...

Fed Chairman Ben Bernanke indicated that the central bank is leaning toward scaling down its MBS purchases later this year, and that rapidly rising mortgage interest rates don’t pose a major threat to the fledgling housing recovery.

Private MBS investors will likely see reduced competition from the Federal Reserve later this year if the central bank begins to slow down its purchases of agency MBS, but there is also likely to be a sharp drop in new MBS supply at the same time. The Federal Open Market Committee made no changes in its policy of adding $40 billion a month to its massive $1.165 trillion portfolio of agency MBS, in addition to reinvesting payments from its agency debt and MBS holdings. It also promised to closely monitor economic and financial developments and stands prepared to increase or decrease its MBS purchases. But Fed Chairman Ben Bernanke later indicated...[Includes two data charts]

The Supreme Court of the United States announced this week that it will hear a legal dispute that would determine whether the Fair Housing Act – and perhaps, by extension, the Equal Credit Opportunity Act – permit claims under the “disparate impact” theory of discrimination. “The threshold issue on appeal is whether plaintiffs may use disparate impact to allege a violation under the Fair Housing Act rather than proving liability by demonstrating an actual intent to discriminate,” explained attorneys with the Dykema Gossett law firm. In Township of Mount Holly, New Jersey v. Mt. Holly Gardens Citizens in Action, the plaintiff citizen group is challenging...

Mortgage lending industry representatives were unanimous in their view that the Consumer Financial Protection Bureau’s ability-to-repay rule and “qualified mortgage” standard, as currently constituted, may severely restrict access to mortgage credit on multiple levels. Testifying earlier this week before the House Financial Services Subcommittee on Financial Institutions and Consumer Credit, James Gardill, chairman of the board of WesBanco, Inc., said on behalf of the American Bankers Association that the QM rule will limit mortgage lending because the QM guidelines narrow lending parameters. “Even within the QM framework, many concerns remain that could limit credit availability to a diverse group of consumers,” Gardill said. Debra Still, chairman of the Mortgage Bankers Association, said...