Investors in non-agency mortgage-backed securities are pushing back against a loan modification program proposed by the Obama administration that would target underwater loans backing their investments. “Quite simply, investors have already been significantly harmed by the poor performance of many of the mortgage loans in non-agency MBS, and the Market Rate Modification proposal would only increase the severity of losses suffered by institutional investors,” Tom Deutsch ...

A recession resulting from the federal government taking the U.S. economy over the fiscal cliff would leave Fannie Mae and Freddie Mac vulnerable to higher credit losses and make the two government-sponsored enterprises unprofitable again, according to Moody’s Investors Service. Moody’s this week warned that Washington’s failure to reach a tax and spending agreement would also force the GSEs to ride out the shockwaves of potential financial market disruptions on their derivatives trades. “In our current central economic scenario, both Fannie Mae and Freddie Mac are...

Investors in non-agency MBS have numerous concerns about a loan modification program proposed by the Obama administration, according to Tom Deutsch, executive director of the American Securitization Forum. The so-called Market Rate Modification program would target borrowers with negative equity on a mortgage in a non-agency MBS. “For the many significantly underwater borrowers that would not default on their mortgage loans, the MRM proposal would ultimately represent a transfer of wealth from the pension fund and 401(k) investors who lent the mortgage principal through residential MBS to borrowers that have not demonstrated any material life changes that would impair their ability to make their monthly mortgage payments,” Deutsch said in a letter this week to the Treasury Department. He noted...

The agency residential MBS market expanded for the third consecutive quarter during the three months ending in September, according to a new Inside MBS & ABS analysis. A total of $5.39 trillion of single-family MBS issued by Fannie Mae, Freddie Mac and Ginnie Mae were outstanding as of the end of the third quarter of 2012. That was up by a scant 0.2 percent from the previous period, although it was still 0.4 percent below the level at the same time in 2011. Both Ginnie (2.1 percent) and Fannie (0.6 percent) posted...[Includes two data charts]

Staff at the Securities and Exchange Commission this week recommended that the agency do more research before making a decision on how to implement a controversial provision in the Dodd-Frank Act involving random assignments of credit ratings in structured finance. Sen. Al Franken, D-MN, was the major proponent of a requirement that the SEC study the feasibility of creating a government body that would pick which credit rating agency would evaluate new non-agency MBS, non-mortgage ABS, commercial MBS and other structured finance transactions. The provision, Sec. 15e(w) of the Dodd-Frank Act, essentially requires the SEC to implement the new system unless the agency determines that an alternative system would better serve the public interest and protect investors. Although some investors and rating services support the Sec. 15e(w) concept, most securitization market participants oppose...

Some mortgage lenders will be able to develop and test, on a limited basis, their own consumer disclosures, under a proposed policy issued last week by the Consumer Financial Protection Bureau. The disclosures would have to be approved by the bureau before being used. “The bureau believes that there may be significant opportunities to enhance consumer protection by facilitating innovation in financial products and services and enabling companies to research informative, cost-effective disclosures,” the CFPB said. “The bureau also recognizes that in-market testing, involving companies and consumers in real world situations, may offer particularly valuable information with which to improve disclosure rules and model forms.” The Dodd-Frank Act gave...

The mortgage servicing rule proposed earlier this year by the Consumer Financial Protection Bureau could easily be exploited to bring any foreclosure proceeding to a grinding halt, according to a leading mortgage industry attorney. If the rule is promulgated as currently written, that could cause mortgage lenders, who are already skittish about future losses, buyback demands and a host of other pending regulations, to pull back even further when it comes to providing mortgage credit. “The consequence of these regulations is to create...

Mortgage lenders saw a welcome decline in the volume of repurchases and indemnifications they had to make during the third quarter, but a new analysis of two major databases by Inside Mortgage Trends reveals that the industry made little progress in resolving the massive overhang of disputes involving loans from the depth of the housing crisis. According to bank call reports, repurchases and indemnifications declined by 21.6 percent from the second to the third quarter ... [Includes 3 data charts]

Government regulations and compliance changes are making it difficult for mortgage professionals to do business in the current environment, while outdated technology and manual processes are impeding the workflow, according to a new Genpact study. Faced with new regulations and a slow housing recovery, the mortgage marketplace badly needs new technology solutions and improved business processes, said the study, which was compiled for Genpact Limited, a provider of ...