Mortgage originators selling loans into MBS last week likely were hit with “pair-off” fees from secondary-market investors who were expecting delivery of higher-yielding mortgages, a proposition complicated by the sudden downdraft in rates. As one secondary market executive noted: “A forward sale into an MBS is not a perfect hedge. Then again, nothing is a perfect hedge.” Originators that fund billions of dollars each quarter use...

Secondary market participants are once again urging government regulators to revise pending margin requirements for the to-be-announced MBS market, lest they negatively disrupt the space and possibly raise the cost of providing mortgage credit. At issue is SR-FINRA-2015-036, a proposal from the Financial Industry Regulatory Authority to establish margin requirements for the TBA market under FINRA Rule 4210. Previously, the Securities Industry and Financial Markets Association urged...

Although lenders like to complain about the new integrated disclosure rule known as TRID, there has been one major benefit for people looking for employment in the mortgage industry: the controversial rule has created jobs at many lending shops. According to managers interviewed by Inside Mortgage Trends the past two weeks, almost across the board, originators have hired new staff to deal with compliance paperwork, the processes and the technology ...

The Obama administration released its budget proposal for 2017 last week and it illustrates a key challenge to managing reform. How can you phase out the GSEs while at the same time planning to use profits from them? The budget emphasized that the housing finance system must be reformed, and the GSEs should be wound down in order to finish addressing the weaknesses exposed by the financial crisis. The administration’s fiscal 2017 budget proposal estimates that Fannie Mae and Freddie Mac will pay $151.5 billion in dividends to the government over the next 10 years, on top of the $241.2 billion in dividends they already paid as of the end of 2015.

Although residential originations fell by roughly 15 percent in the fourth quarter on a sequential basis, warehouse lenders saw their commitments inch up slightly, according to new figures compiled by Inside Mortgage Finance. At Dec. 31, warehouse banks had extended an estimated $49.0 billion of commitments to non-depository lenders, a 2.1 percent sequential gain. Compared to yearend 2014, commitment levels rose a handsome 28.9 percent. Part of the reason for the increase in activity – especially year-over-year – can be explained...[Includes one data table]

A long-expected correction in MBS prices was put on hold this week as interest rates took another dive and concerns continued to mount about China’s stagnant economy and weakening oil prices. As Inside MBS & ABS went to press late this week, the yield on the benchmark 10-year Treasury was at 1.61 percent, the lowest it’s been in roughly four years. The volatility in the market was sparking...

Officials at American Capital Agency announced last week that the real estate investment trust formed a wholly-owned broker-dealer subsidiary. The broker-dealer will help provide the REIT with repo funding and to-be-announced MBS trade-clearing capabilities. Peter Federico, a senior vice president and chief risk officer at American Capital, said the REIT started forming the broker-dealer about six months ago. He said the entity is fully staffed and is in the regulatory application process, with operations expected to begin midyear. “Once our broker-dealer is up and running, we will pursue...

Investors in the secondary market are continuing to shy away from mortgages with so-called TRID errors – even minor ones – taking the advice of legal counsel and due diligence providers who are telling them to stay clear because of assignee liability issues. Late last week, senior executives from the Structured Finance Industry Group traveled to Washington to meet CFPB Director Richard Cordray, but one official familiar with the get-together said the regulator conveyed a message of “Thanks for coming in, but we don’t think there’s a problem.” For now, most of the concern about a stalled secondary market has focused...

The advent of mobile phone financing has given U.S. asset-backed securitization a new twist with its unique risks and strengths relative to other consumer ABS, according to a new report from Moody’s Investors Service. Mobile phone financing represents a shift from the previous business model of subsidizing phone purchases for customers with two-year service contracts. Many cell-phone makers and wireless carriers, such as Apple, Samsung Electronics, T-Mobile, AT&T, Sprint and Verizon, now use financing contracts in most of their phone sales. The most common form of financing is...

The Consumer Financial Protection Bureau’s disclosure rule has caused some disruptions in the non-agency market, but a number of lenders suggest that they’ve made adjustments to TRID and expect to return to business as usual. TRID disclosure requirements took effect for loan applications submitted on Oct. 3 and beyond. In the weeks after, many lenders reported longer closing timelines along with issues involving sales of non-agency mortgages due to ...