As the “shadow” banking sector has grown and evolved since the 1970s, questions have arisen as to the extent to which traditional banks may have been displaced by other financial institutions, insurance companies and entities as alternate sources of financing and the credit enhancement to securitization transactions. However, three economists at the New York Federal Reserve Bank recently found that, contrary to the notion that banks are being eclipsed by other institutions, banks have held their own against insurance companies involved in the enhancement business, despite their underdog status. “The first thing to note is that enhancements by insurance companies outnumber...

On recommendation by its Inspector General, the Department of the Treasury is developing written policies and procedures for selecting financial agents that will require full and timely documentation of the selection process. The recommendation was prompted by an IG audit of Treasury’s selection of financial agents for the Agency MBS Purchase Program, which is no longer in operation. Treasury acquired a total of $225 billion of agency MBS under the program, which the agency began selling in March last year when market conditions improved. Sales were completed in March 2012. State Street Bank and the New York branch of Barclays Bank were selected...

The Federal Housing Finance Agency captured the industry’s attention this week by formally citing “significant concerns” about proposals to use local government eminent domain powers, a paradigm shift the agency sees as potentially costly to Fannie Mae, Freddie Mac and the Federal Home Loan Banks. In a request for public comment, published in the Aug. 8 Federal Register, the Finance Agency warned that “action might be necessary” on its part “to avoid a risk to safe and sound operations” at the GSEs and to avoid taxpayer expense.

The cost to close on a mortgage has dropped seven percent to an average $3,754 in the past year, according to the eighth annual closing costs survey from Bankrate.com. Title insurance and other third-party fees fell 12 percent from last year’s levels, while origination fees dipped a slight one percent. “This is the second year in which lenders are required...

Ocwen Financial is set to reduce its effective tax rate by more than half due to the recent formation of a subsidiary corporation in the U.S. Virgin Islands. The federal corporate income tax rate in the U.S. is 35.0 percent and Ocwen had an effective tax rate of 36.0 percent through two quarters in 2012. “We believe [Ocwen’s effective tax rate] will be mid-to-high single digits,” said Bill Erbey, executive chairman of the servicer, during an earnings presentation last week. He said the lower tax rate could take effect...

The private mortgage insurance industry is now officially under the microscope of the Consumer Financial Protection Bureau over its captive mortgage reinsurance premium ceding practices for possible violations of key federal statutes, including the Real Estate Settlement Procedures Act. The CFPB is carrying forward a number of investigations it inherited from the Department of Housing and Urban Development after passage of the Dodd-Frank Act. Critics contend that captive reinsurance programs violate RESPA’s prohibition by collecting insurance premiums without providing any real service or value to the transaction. Civil investigative demands, or CIDs, sent to several private MIs “mean...[Includes one data chart]

The Office of the Comptroller of the Currency and the Federal Reserve are implementing third-party recommendations to improve borrower outreach and provide more opportunity for borrowers to request an independent foreclosure review (IFR), and giving consumers more time to ask for a review. Borrowers can request a review if they believe they have suffered financial injury from improper foreclosure actions in 2009 and 2010. The IFR process is being conducted by 14 mortgage servicers that are subject to the consent orders issued by the OCC and the Fed in April 2011. The orders required servicers to take steps to establish strong and comprehensive standards for mortgage servicing and foreclosure processing and to carry out...

Home Affordable Modification activity in the second quarter of 2012 was well below HAMP activity in the second quarter of 2011, according to an Inside Mortgage Finance analysis of reports from the Special Inspector General for the Troubled Asset Relief Program and Treasury Department. The number of permanent HAMP mods outstanding hit 818,803 at the end of the second quarter of 2012, an increase of 24,055 compared with the previous quarter. But activity in the second quarter of 2012 was down 65.7 percent compared with activity a year ago. HAMP activity spiked in the second quarter of 2011 and has declined each quarter since. A recent audit completed by the SIGTARP suggested that activity has been limited...

Mortgage lenders and appraisers widely agree that the appraisal process needs to be improved, as the industry faces a fresh wave of new federal regulations. During a conference sponsored this week by the Collateral Risk Network and the American Enterprise Institute, John Brenan, director of appraisal issues at The Appraisal Foundation, suggested that lenders have stymied appraiser efforts to change the process. “You can’t ignore the fact that the banking lobby is one of the strongest in the country,” he said. Penny Reed, a vice president of strategic partner management at Wells Fargo Home Mortgage, acknowledged...