A recession resulting from the federal government taking the U.S. economy over the fiscal cliff would leave Fannie Mae and Freddie Mac vulnerable to higher credit losses and make the two government-sponsored enterprises unprofitable again, according to Moody’s Investors Service. Moody’s this week warned that Washington’s failure to reach a tax and spending agreement would also force the GSEs to ride out the shockwaves of potential financial market disruptions on their derivatives trades. “In our current central economic scenario, both Fannie Mae and Freddie Mac are...

Investors in non-agency mortgage-backed securities are pushing back against a loan modification program proposed by the Obama administration that would target underwater loans backing their investments. “Quite simply, investors have already been significantly harmed by the poor performance of many of the mortgage loans in non-agency MBS, and the Market Rate Modification proposal would only increase the severity of losses suffered by institutional investors,” Tom Deutsch ...

Damage from Hurricane Sandy will have a negligible impact on mortgages in outstanding non-agency mortgage-backed securities, according to a new analysis by Opera Solutions. The servicing analytics provider said 45 non-agency MBS deals with $19.6 billion in outstanding balance have mortgages with exposure to significant damage from the storm and the likely affected balance is $6.0 billion. “Based on a detailed analysis of each portion of affected ZIP codes, the ultimate exposure is much lower ... [Includes four briefs]

As the wait for the highly anticipated “qualified mortgage” final rule continues, its impact on FHA lending programs remains uncertain. Concerns have been raised over the possibility that the final QM rule the Consumer Financial Protection Bureau is finalizing may establish a “safe harbor” for prime loans with a maximum debt-to-income ratio of up to 43 percent. This could have implications for FHA loans, which allow higher back-end ratios under certain circumstances, according to some lenders and industry participants. At what point the DTI ratios will ...

The latest CFPB-related work plan of the Federal Reserve Office of Inspector General indicates the OIG is working on an evaluation of the bureau’s annual budget process, a political flash point on Capitol Hill for Republican critics and opponents of the agency. “As an independent agency within the Federal Reserve System, the CFPB is funded principally by the Federal Reserve System in amounts determined by the CFPB director as necessary to carry out the agency’s operations, subject to limits established in the...

The mortgage servicing rule proposed earlier this year by the Consumer Financial Protection Bureau could easily be exploited to bring any foreclosure proceeding to a grinding halt, according to a leading mortgage industry attorney. If the rule is promulgated as currently written, that could cause mortgage lenders, who are already skittish about future losses, buyback demands and a host of other pending regulations, to pull back even further when it comes to providing mortgage credit. “The consequence of these regulations is to create...

Some mortgage lenders will be able to develop and test, on a limited basis, their own consumer disclosures, under a proposed policy issued last week by the Consumer Financial Protection Bureau. The disclosures would have to be approved by the bureau before being used. “The bureau believes that there may be significant opportunities to enhance consumer protection by facilitating innovation in financial products and services and enabling companies to research informative, cost-effective disclosures,” the CFPB said. “The bureau also recognizes that in-market testing, involving companies and consumers in real world situations, may offer particularly valuable information with which to improve disclosure rules and model forms.” The Dodd-Frank Act gave...

Two separate white papers from industry trade groups on reform of the government-sponsored enterprises call for a strong government role to provide stability and liquidity in multifamily mortgage finance. The Mortgage Bankers Association called for a system of private capital finance for multifamily housing, with a focus primarily on securitization and the federal government serving as a catastrophic insurer. The program would be funded through risk-based premiums paid by the entities that securitize the loans, according to Brian Stoffers, president of CBRE Debt and Equity Finance. “We recognize...

Democrats are making another attempt to require the forgiveness of principal on delinquent mortgages guaranteed by Fannie Mae and Freddie Mac as the White House and lawmakers are in talks to avoid the pending fiscal cliff. This week a group of 18 House Democrats dispatched a letter to President Obama and congressional leaders of both parties urging them to expand assistance to borrowers as part of any tax increase and spending cut resolution package. “Given the clear benefits of providing assistance to underwater borrowers, as well as the significant savings for the American taxpayers, we believe that provisions expanding such assistance should be part of any deal to resolve the fiscal cliff,” the members wrote. “At a minimum, such legislation should require that Fannie Mae and Freddie Mac offer principal reduction loan modifications to borrowers who are net present value positive.”

Fair lending enforcement moved to a new level last week when the CFPB and the Department of Justice signed an agreement to strengthen the coordination of their efforts in this regard as well as to avoid duplication. The good news for the industry is any effort to reduce government duplication could similarly reduce lenders’ compliance burden. Under the memorandum of understanding the agencies signed, the CFPB and Justice will meet regularly on investigations and establish strict confidentiality for shared information...