Fannie Mae and Freddie Mac reported a combined $5.0 billion in net income during the second quarter of 2014, down 46.2 percent from the first three months of the year as the two government-sponsored enterprises reported a significant downshift in repurchase activity. Through the first six months of the year, GSE profits were down nearly 81.7 percent from the first half of 2013. But Fannie and Freddie reaped huge profits in 2013 through hefty legal settlements, the capture of deferred tax assets and seller buybacks. “When you look back on 2013, our goal was...

Banks need incentives to issue non-agency mortgage-backed securities instead of holding loans in portfolio, according to boosters of the non-agency MBS market. The Federal Reserve’s monetary policies and capital requirements set by federal regulators have played a role in the shift from non-agency MBS issuance to banks holding loans in portfolio. “Historically, major banks were the predominant sponsors of private-label securities transactions, especially for 30-year jumbo fixed-rate loans, which are not a good asset/liability match for their balance sheets,” officials at Redwood Trust noted in a comment letter submitted to the Treasury Department. In June, the Treasury issued a request for comments on how to increase non-agency activity in the mortgage market. In 2013, only 4.8 percent of the estimated $272.0 billion in non-agency jumbo originations were included...

The U.S. Fourth Circuit Court of Appeals has ruled in favor of Wells Fargo and co-defendant Long & Foster in a class-action dispute involving an affiliated business arrangement. In Minter v. Wells Fargo Bank, NA et al, plaintiffs/appellants Denise Minter, Jason and Rachel Alborough, and Lizbeth Binks brought suit on behalf of a group of consumers alleging that Wells Fargo and Long & Foster Real Estate violated the Real Estate Settlement Procedures Act. Specifically, the plaintiffs alleged that defendants created a joint venture, Prosperity Mortgage Co., to skirt RESPA’s prohibition on kickbacks in exchange for the referrals of settlement service business while failing to disclose this business arrangement to its customers. Here’s...

The Structured Finance Industry Group this week proposed the first in a planned long line of standards aimed at increasing transparency for non-agency MBS investors and boosting new issuance. The first edition in the SFIG’s series of “green papers” covers certain representations and warranties, triggers for repurchase, due diligence and communication with investors. Richard Johns, SFIG’s executive director, said about 200 individuals from about 50 organizations involved in the non-agency MBS market have participated in Project RMBS 3.0. “The goal here is...

Fannie Mae and Freddie Mac are expected to pay some $5.6 billion to taxpayers based on “normal” second-quarter earnings that were not bloated by big-ticket tax breaks or large litigation settlements, the two government-sponsored enterprises announced this week. Once the two GSEs have made the latest Treasury payment in September, Fannie and Freddie will have returned about $218 billion to taxpayers for the approximately $188 billion in financial support the two firms received after being placed in government conservatorship in September 2008. Under the revised conservatorship agreement announced two years ago this month by the Federal Housing Finance Agency and the Treasury Department, any GSE net worth exceeding $3.0 billion is impounded...

The Federal Reserve Bank of New York is rolling out a one-year pilot program for a limited number of firms that do not meet the minimum capital requirement for primary dealers to function as counterparties in agency MBS operations it runs for the System Open Market Account portfolio. The FRBNY said its intent is to explore ways to broaden access to open market operations, and to determine the extent to which firms beyond the primary dealer community can augment the FRBNY’s operational capacity and resiliency in its monetary policy operations. “This pilot will allow...

Lender profit margins appear set to stop declining, according to a new survey by Fannie Mae of senior executives at 181 institutions. Industry participants suggest that increased demand from borrowers along with operational efficiencies will help steady profit margins. Doug Duncan, senior vice president and chief economist at Fannie, said the significant decline in volume in recent quarters put pressure on profit margins. “That would be expected to ease somewhat ...

Fannie Mae, Freddie Mac and Ginnie Mae each recorded double-digit increases in single-family business in July, marking the fourth straight monthly gain, according to a new ranking and analysis by Inside MBS & ABS, an affiliated newsletter. The three produced $85.3 billion of single-family mortgage-backed securities last month, an 11.6 percent increase from June’s volume. The biggest increase was at Fannie, where production was up 12.6 percent for the month. The steady gains in production starting in April have not been...

Five years after the first round of loan modifications began in April 2009 under the Treasury Department’s Home Affordable Modification Program, 32,111 loans are scheduled for their first interest rate resets this October. The impact of this first wave is expected to be limited. But in each of the next successive four years, HAMP resets will reach into six-figure territory, and by the time the smoke clears, upwards of 800,000 loans will face multiple interest rate tests. “The HAMP resets will be...

Mortgage lenders are getting weary of the seemingly never-ending supply of new regulations and proposals coming from the CFPB – with the latest being last month’s issuance of the bureau’s proposed rulemaking to ratchet up lender reporting requirements under the Home Mortgage Disclosure Act. Lenders of all size are concerned that the proposal goes beyond what is mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act and means increased compliance costs that will be passed onto consumers. And representatives of smaller institutions fear they will once again be set at a competitive disadvantage vis-à-vis larger lenders. Additionally, consumer data privacy considerations have emerged as another concern. The bureau, for its part, pitched the proposal as a way to improve ...