Publicly traded real estate investment trusts that buy MBS continued to whittle down their positions in government and agency product during the third quarter, a trend that some fear may have no bottom. Market leader Annaly Capital Management trimmed its MBS holdings to $66.3 billion during the period, a 1.9 percent sequential decline, but an ugly 18.6 percent drop compared to the third quarter of last year. It is investing more of its cash in commercial product. Number two ranked American Capital Agency Corp. was...[Includes one data table]

The Structured Finance Industry Group put out the third edition of its RMBS 3.0 “Green Papers” initiative early this week, featuring dozens of model representations and warranties for new non-agency residential MBS, including a range of proposed standardized constructs. “This release substantially builds upon our growing series of Green Papers, which are aimed at restoring confidence to the ‘private label’ RMBS market,” the trade group said. The first and second editions were released in 2014. The 39 model reps and warrants included in the third edition complete...

The hedging results of Fannie Mae and Freddie Mac – including instruments bought to protect the value of agency MBS – had different results in the third quarter as interest rates unexpectedly declined and stayed low for several weeks. Overall, Fannie booked $2.6 billion of negative charges against the value of its derivatives in the third quarter while Freddie booked a much larger charge on its hedging activities: $4.2 billion. The differential did not pass...

Thanks to declining interest rates and higher prepayment speeds in the third quarter – especially on Ginnie Mae receivables – several publicly traded nonbanks were forced to write down the asset value of their mortgage servicing rights, causing millions of dollars in red ink. According to a review by Inside Mortgage Finance of the earnings statements of six nonbanks, the combined servicing markdown was an ugly $448 million. The group includes Nationstar Mortgage, Ocwen Financial, PennyMac Financial Services, PHH Corp., Stonegate Mortgage and Walter Investment Management Corp., the parent of Ditech Financial. Walter took...

The legal table is set for a potentially pivotal court ruling on the mortgage industry’s use of marketing services agreements under the Real Estate Settlement Procedures Act, now that the Consumer Financial Protection Bureau submitted its “reply” brief with the U.S. Court of Appeals for the District of Columbia in the agency’s dispute with PHH Mortgage. In its filing last week in PHH Corp., et al., v. CFPB, the bureau did not try to assert that all MSAs are unlawful or illegitimate, in and of themselves. “Parties to illegal kickback agreements are unlikely to put those agreements into writing. So those agreements may have to be identified based on circumstantial evidence and inference,” said the CFPB. “But RESPA Section 8(c)(2) clarifies when it is not proper to infer an illegal agreement. Illegality cannot be inferred merely because a party that received referrals makes payments to a party that made the referrals. “Moreover, such an arrangement is...

Promoting affordable housing by recapitalizing Fannie Mae and Freddie Mac is the premise of a new study released this week by the Brookings Institution arguing that their conservatorship should come to an end. Obama administration officials have previously rejected such proposals. The paper noted that the Treasury Department’s sweep policy, which takes the bulk of Fannie’s and Freddie’s profits, limits the government-sponsored enterprises’ ability to promote homeownership and expand access to affordable home ownership, especially among low-income households. Robert Shapiro, former Brookings fellow, and chairman of Sonecon, LLC, along with Elaine Kamarck, a senior fellow at Brookings, said...

Despite a recovering housing market, the number of first-time homebuyers fell to the lowest level it’s been in close to 30 years, according an annual survey from the National Association of Realtors. The share of first-time buyers in the marketplace declined for the third year in a row, dipping to 32 percent, from 33 percent a year ago. The NAR said it hasn’t been that low since the trade group began the survey in 1981. Recent numbers show it’s the second lowest it’s been since 1987, when first-timers accounted for 30 percent of the market. Historically, the long-term average shows...

When it comes to trading in agency MBS, Deutsche Bank is heading for the exits as a lack of volume in a once-thriving profit center continues to head south. Granted, Deutsche’s departure from the space is part of a huge worldwide restructuring at the German-based bank, but with MBS trading volume falling to a 13-year low last year – and not looking much better this year – the decision was likely an easy one. Chris Whalen, senior managing director at Kroll Bond Rating Agency, said...

The Structured Finance Industry Group and Securities Industry and Financial Markets Association plan to file a “friend of the court” brief with the Supreme Court of the United States in support of a defendant in a case affecting consumer ABS – the severity of which is a matter of debate. In the case of Madden v. Midland Funding, the Second Circuit Court of Appeals back in May determined that a debt buyer who purchased defaulted credit card accounts from a national bank is not entitled to collect interest under the National Bank Act at the rate set in the cardholder agreement. About a month later, SFIG and SIFMA filed...

Mortgage lenders made it tougher for borrowers to obtain mortgage credit in the second quarter of 2015 compared to the first three months of the year. The mortgage credit availability index overall fell slightly in the second quarter to 5.3, down from 5.5 in the prior quarter, although that level still remains above the low of 4.6 in the third quarter of 2013, according to the Urban Institute’s Housing Finance Policy Center (HFPC). The HFPC uses...