At the end of July, Fannie Mae and Freddie Mac will report second quarter results that might be marred – at least a little bit – by non-cash hedging charges caused by lower interest rates. When June ended, the benchmark 10-year Treasury bond carried a yield of 2.30 percent, 10 basis points lower than at March 31. Lower rates usually translate into hedging markdowns, but since the decline was so small it’s unlikely that either government-sponsored enterprise will record a net accounting loss for the period. In general, the two don’t discuss...

Federal Reserve Governor Jay Powell urged lawmakers to figure out a solution to the extended conservatorships of Fannie Mae and Freddie Mac, noting that a healthy economy and the risk to taxpayers make now an ideal time to act. In a speech this week at the American Enterprise Institute, Powell noted that the two government-sponsored enterprises are now in their ninth year of conservatorship. He worries that if reform doesn’t happen soon it may not happen at all. Powell said any change would be more challenging to enact during difficult economic times. “The risk that we settle into this current situation for the long run is...

More Fannie Mae and Freddie Mac shareholders are arguing that the structure of the Federal Housing Finance Agency is unconstitutional and are calling for courts to vacate the third amendment that sweeps the profits of the mortgage giants into the Treasury Department. Within the past month, two new cases have been introduced in Michigan and Minnesota, likely piggybacking on last year’s decision in which the single-director structure of the Consumer Financial Protection Bureau was found to be unconstitutional. Several shareholders of the government-sponsored enterprises filed...

Wells Fargo is defending last week’s decision to hold back more than $90 million from investors attempting to recoup losses from legacy single-family MBS. The bank said it withheld distribution of reserve amounts to the plaintiffs in the 2014 trustee lawsuit “when certain RMBS transactions were liquidated at another party’s direction.” A Bloomberg report said New Residential Investment Corp. exercised its cleanup buyback option to reduce its own administrative expenses. “Cleanup buyback” refers to early redemption of the remaining issue amount by the seller when the principal has been paid down to an insignificant amount. In a statement, Wells Fargo explained...

This spring, Fannie provided Invitation Homes with a $1 billion financing vehicle, which gave the real estate investment trust a cheaper cost of funds than tapping the MBS market.

The Fed governor noted: “The risk that we’ll settle into this current situation for the long run is very great.”

Walter Investment, the parent of Ditech, is considered a turnaround situation...

Fresh off agreeing to buy $20 billion in mortgage servicing rights and production assets from New York Community Bancorp, Freedom Mortgage is in the hunt for more deals. “We’re looking and we’ve had people approach us with opportunities,” company founder and CEO Stanley Middleman told Inside Mortgage Finance. “We’re working on several MSR acquisitions right now.” Middleman declined...

An analysis of non-qualified mortgages suggests that many of these borrowers have credit qualities strong enough to qualify for a mortgage that could be delivered to the government-sponsored enterprises. However, issues involving credit events and income documentation can disqualify such borrowers from conventional mortgages. According to an analysis by Morningstar Credit Ratings, the weighted-average loan-to-value ratio for securitized non-QMs is 75.2 percent and the average debt-to-income ratio on the loans is 36.6 percent. The rating service noted that QMs (including agency and non-agency mortgages) have an average LTV ratio around 69.0 percent and an average DTI ratio around 32.3 percent. In addition to showing that certain characteristics don’t differ much between QM borrowers and non-QM borrowers, the analysis suggests...

Compliance issues involving nonbank servicers remain an ongoing problem, according to new reports from state regulators. And the regulators raised concerns about how a shift by lenders to purchase mortgages increases compliance risks. “The increase in transfers of mortgage servicing rights to non-depositories in recent years has stressed these servicers’ sometimes inadequate operating systems and infrastructures, requiring greater regulatory attention,” the Multi-State Mortgage Committee said in a report to state regulators. The MMC was established by state regulators to supervise multi-state nonbank mortgage entities. Eight mortgage-related exams were...