For the third time in as many years, the U.S. Federal Reserve decided to raise the federal funds rate by 25 basis points this week, as widely expected – only this time, the Fed didn’t wait until the very end of the year. The FOMC’s revised projections are for two additional quarter-point rate hikes later this year, three next year and three or four the year after. World stock indexes rallied...

Industry practices that are developing around risk-retention requirements for MBS and ABS might be rejected by federal regulators, according to a former special counsel at the Securities and Exchange Commission. The Dodd-Frank Act established risk-retention requirements for various types of MBS and ABS. The rule generally requires sponsors of a security to retain at least 5.0 percent of the issuance, in an effort to align the interests of issuers with the interests of investors. Among the options to comply with risk-retention requirements, sponsors can retain...

Ginnie Mae’s outdated organizational structure and staff levels have made it difficult for the agency to properly monitor and mitigate the risk posed by the increasing number of nonbanks participating in its MBS programs, according to the Department of Housing and Urban Development’s inspector general. In a recent briefing paper, HUD Inspector General David Montoya highlighted challenges Ginnie faces in monitoring nonbanks, adding that HUD is currently being audited by the IG to gauge its capacity to track and supervise nonbanks, said Montoya. Ginnie acknowledged...

Tax reform may have a significant impact on Fannie Mae and Freddie Mac, before federal policymakers get around to resolving the long-running conservatorships of the two government-sponsored enterprises. Reducing the corporate tax rate is a big component of the Trump administration’s tax reform plan, but it could force the GSEs to write down the value of their deferred tax assets. “It is...

In a prominent Fannie Mae and Freddie Mac shareholder case, the government was ordered to go back through thousands of documents related to the Treasury sweep to determine whether they fall under the executive privilege that has been more narrowly defined. In an attempt to make sure the government asserted privilege properly on the 11,000 documents it is withholding, Federal Claims Court Judge Margaret Sweeney asked it to reexamine the large batch and turn over any that don’t merit secrecy by April 17. This order follows...

An interview this week with Peter Schiff, CEO of Euro Pacific Capital and a perennial critic of the Federal Reserve, suggests that the extraordinary level of support the U.S. central bank gave to the housing and mortgage markets in the wake of the financial crisis may mean the Fed is stuck between a rock and a hard place.

As interest rates increase and refinance business shrinks, some lenders are putting an emphasis on non-qualified mortgages. “CashCall Mortgage’s business in refinance has fallen off; it is now targeting a different section of the marketplace,” Joe Tomkinson, chairman and CEO of Impac Mortgage Holdings, said during the nonbank’s recent earnings call. “Now we are bringing a product that is very real estate friendly to the marketplace, and we will see an increase in that.” Most of ...

Solicitation of VA purchase loans for streamline refinancing within weeks of closing is apparently continuing despite Ginnie Mae’s efforts to stop the harmful practice. The Mortgage Bankers Association has expressed concern that guidance on pooling eligibility for streamlined refinance loans, which Ginnie issued in October last year, was far less effective than expected. Although the aggressive refinancing trend has slowed due to Ginnie’s action, there are still “pockets of that activity” being reported, said Pete Mills, MBA senior vice president. Refinancing a veteran’s purchase mortgage less than six months after its origination is not in the vet’s best interest because it strips equity from the house and results in higher financing costs, said Mills. While the rapid refi trend involves only a small number of loans in Ginnie mortgage-backed securities pools, investors do not get the full benefit of their investment because of early prepayment. Mills said there are a handful of lenders and brokers that ...

A favorable court ruling on the statute of limitations for filing claims under the False Claims Act gave Quicken Loans its first win in a closely watched government case involving allegedly fraudulent FHA loans. Judge Mark Goldsmith of the U.S. District Court for the Eastern District of Michigan dismissed portions of the Department of Justice’s lawsuit against Quicken in a March 9 decision, narrowing the lender’s potential liability for FHA losses. The losses were blamed on sloppy underwriting, fraudulent certification and loan performance. The DOJ said the FHA would not have knowingly insured the loans had it known they were defective. The DOJ and the Department of Housing and Urban Development’s inspector general began an investigation of Quicken’s FHA lending activities in April 2012. The investigation encompassed some 246,000 FHA loans, which Quicken originated from ...

A Georgia appellate court recently handed Wells Fargo Bank a provisional win in a lawsuit in which a VA borrower alleged breach of contract and wrongful foreclosure. In Wells Fargo Bank, N.A., d/b/a Wells Fargo Home Mortgage v. LaTouche, the court ruled that Wells did not breach its duty to the borrower to comply with VA foreclosure regulations. The court concluded that the trial court had erred in denying Wells Fargo’s motion for summary judgment as to the defendant’s claims for wrongful foreclosure that hinged upon the same VA regulations. The reversal stemmed from Wells Fargo’s request for an interlocutory review of the trial court’s denial of its motion for summary judgment on defendant Michael LaTouche’s claims for breach of contract, wrongful foreclosure and “surprise. An interlocutory review is undertaken when a question of law must be answered by an appellate court before ...