Capital requirements regarding bank holdings of non-agency MBS increased significantly after federal regulators implemented Basel III reforms in 2014. And while banks have largely been reluctant to re-enter the market for non-agency MBS issuance, a recent report by the Government Accountability Office suggests that the impact of bank involvement in the non-agency MBS market is unclear. The GAO was asked to explain how capital requirements for a mortgage depend on how the loan is financed and how the requirements have changed since the financial crisis. The report was requested by Sen. Richard Shelby, R-AL, who until recently was the chairman of the Senate Committee on Banking, Housing and Urban Affairs. The GAO noted...

Mortgage compliance experts say there’s still a strong need for the Consumer Financial Protection Bureau to provide more guidance about acceptable business relations under Section 8 of the Real Estate Settlement Procedures Act. One of the issues that came to the fore in the bureau’s enforcement action against PHH Mortgage was lenders’ relationships under marketing services agreements. Even though banks these days may be using MSAs to a lesser extent than nonbanks, there is still a need for the CFPB to more clearly delineate do’s and don’ts. “On the lender side of the mortgage industry, there is...

With the formal transition of presidential power now a mere week away, Congressional Republicans and Democrats alike were busy this week reordering the teams that will take the field for the 115th Congress. Mortgage lenders are hopeful for at least some degree of regulatory relief from the Republican-controlled Congress and White House, but Democrats are vowing to defend the Dodd-Frank Act, one of the signature achievements of the outgoing Obama administration. Republicans in the House of Representatives got...

In late December, Freddie Mac issued a $934.27 million security backed by seasoned mortgages. It was the first seasoned credit-risk transfer from the government-sponsored enterprise. While Freddie has issued fully guaranteed securitizations backed by seasoned mortgages, Freddie Mac Seasoned Credit Risk Transfer Trust, Series 2016-1 included tranches without a guarantee from the GSE, similar to a non-agency senior-sub MBS. The transaction included...

Regulators are working to get a better understanding about the ownership of mortgages, particularly for the span between origination and final funding, according to the Office of Financial Research. “Regulators now collect origination data and loan performance data about much of the home mortgage market,” the OFR said in its recently published 2016 financial stability report. “However, they do not collect data about ownership of a mortgage between origination and final funding. Information on this short phase in the life of a loan is needed for a full picture of risks.” The OFR, an office of the Treasury Department that was established by the Dodd-Frank Act, noted...

PHH Corp., the Department of Justice and the Consumer Financial Protection Bureau have, in recent weeks, gone back and forth with the filing of briefs on multiple angles associated with the legal dispute the lender has had with the CFPB over alleged violations of the Real Estate Settlement Procedures Act. However, it looks like the separation of powers under the U.S. Constitution will play a more decisive role in the outcome than will issues related to RESPA, according to some top legal observers. PHH and the DOJ both submitted responses to the District of Columbia Circuit Court of Appeals on Dec. 22, the deadline set by the court. The government is seeking an en banc review by the full appeals court of a ruling by a three-judge panel. In its brief, the mortgage lender said...

The Federal Housing Finance Agency late last month issued two final rules that will give the Federal Home Loan Banks somewhat more flexibility in setting collateral requirements for advances and managing their acquired member assets (AMA). A new AMA rule was necessary because the Dodd-Frank Act requires financial regulators to remove references to ratings, which had been used in setting limits on their AMA programs, most of which involve purchases of mortgages from member institutions. Under the new rule, the FHLBanks will be able to choose their own models to determine credit enhancement requirements. The FHFA also deferred...

As 2016 drew to a close, various industry officials were busy making the case for legislation that would alter the structure of the CFPB and clip its wings as part of a strategy to scale back the Dodd-Frank Act and provide lenders with significant regulatory relief. Industry officials are confident they will encounter a more sympathetic White House with Donald Trump as the occupant. Analysts with Compass Point Research & Trading believe a number of important issues will be addressed as part of the final legislative regulatory relief package, including governance changes shifting the CFPB, as well as the Federal Housing Finance Agency and the Office of the Comptroller of the Currency, into commission structures. They also expect to see ...

Jim Parrott, a senior fellow at the Urban Institute and owner of Falling Creek Advisors, last week outlined three steps industry participants and federal regulators could take to boost issuance of non-agency MBS. The proposal involves the establishment of a self-regulatory organization, regulatory relief for MBS that meet standards set by the SRO, and allowing non-agency MBS to be issued through the common securitization platform being developed by Fannie Mae and Freddie Mac. Parrott detailed...

Origination of commercial mortgages could reach $515 billion this year, a slight improvement over 2015, but more lenders – life insurance companies and banks, in particular – are keeping the loans on their books, which doesn’t bode well for CMBS issuance. It’s the same conundrum facing the jumbo residential market: plenty of lending, but not so much in the way of securitization. As Inside MBS & ABS reported recently, issuance of CMBS increased...