The proposal to restructure the credit-risk transfer debt-note programs at Fannie Mae and Freddie Mac to make them more attractive to real estate investment trusts likely won’t have a negative impact on the credit risk and quality of those deals, Morningstar said in a new report. The proposed changes to Fannie’s Connecticut Avenue Securities and Freddie’s Structured Agency Credit Risk programs would characterize them as real estate mortgage investment conduits. This would allow REITs and some overseas investors to participate more broadly in the programs. Currently, the structure of the government-sponsored enterprises’ popular CRT programs doesn’t meet...

After a few months of delay, the Consumer Financial Protection Bureau last week issued its long-awaited final rule clarifying a number of aspects of its integrated disclosure rulemaking under the Truth in Lending Act and the Real Estate Settlement Procedures Act, otherwise known as TRID 2.0. The most noteworthy revisions relate to good faith and revised disclosures, calculating cash to close, construction-to-permanent loans, and the sharing of disclosures during the origination process. In terms of good faith and revised disclosures, the 2017 TRID rule provides...

The Department of Veterans Affairs is seeking approval from the Office of Management and Budget to continue collecting information considered crucial in approving certain lender requests to close VA loans automatically. Currently, non-supervised VA lenders requesting approval to close VA loans on an automatic basis use VA Form 26-8736 to submit the information needed for VA approval. Upon receiving the form, the appropriate VA regional loan center processes and evaluates the information. Without the required data, VA would not be able to determine if a non-supervised lender is qualified for automatic loan processing. The required data include, among other things, a resume of each principal officer’s experience in mortgage lending in a managerial capacity and the latest financial statements audited and certified by a certified public accountant. The form also requires a listing of all ...

At the end of July, Fannie Mae and Freddie Mac will report second quarter results that might be marred – at least a little bit – by non-cash hedging charges caused by lower interest rates. When June ended, the benchmark 10-year Treasury bond carried a yield of 2.30 percent, 10 basis points lower than at March 31. Lower rates usually translate into hedging markdowns, but since the decline was so small it’s unlikely that either government-sponsored enterprise will record a net accounting loss for the period. In general, the two don’t discuss...

Federal Reserve Governor Jay Powell urged lawmakers to figure out a solution to the extended conservatorships of Fannie Mae and Freddie Mac, noting that a healthy economy and the risk to taxpayers make now an ideal time to act. In a speech this week at the American Enterprise Institute, Powell noted that the two government-sponsored enterprises are now in their ninth year of conservatorship. He worries that if reform doesn’t happen soon it may not happen at all. Powell said any change would be more challenging to enact during difficult economic times. “The risk that we settle into this current situation for the long run is...

More Fannie Mae and Freddie Mac shareholders are arguing that the structure of the Federal Housing Finance Agency is unconstitutional and are calling for courts to vacate the third amendment that sweeps the profits of the mortgage giants into the Treasury Department. Within the past month, two new cases have been introduced in Michigan and Minnesota, likely piggybacking on last year’s decision in which the single-director structure of the Consumer Financial Protection Bureau was found to be unconstitutional. Several shareholders of the government-sponsored enterprises filed...

An analysis of non-qualified mortgages suggests that many of these borrowers have credit qualities strong enough to qualify for a mortgage that could be delivered to the government-sponsored enterprises. However, issues involving credit events and income documentation can disqualify such borrowers from conventional mortgages. According to an analysis by Morningstar Credit Ratings, the weighted-average loan-to-value ratio for securitized non-QMs is 75.2 percent and the average debt-to-income ratio on the loans is 36.6 percent. The rating service noted that QMs (including agency and non-agency mortgages) have an average LTV ratio around 69.0 percent and an average DTI ratio around 32.3 percent. In addition to showing that certain characteristics don’t differ much between QM borrowers and non-QM borrowers, the analysis suggests...

Mortgage lenders will not be subject to supervisory or enforcement actions for violations of the early implementation guidance for the revised 2016 mortgage servicing rule, according to the Consumer Financial Protection Bureau. The CFPB issued “non-binding” policy guidance last week to allay lenders’ fear of being penalized if they fail to implement the 2016 servicing amendments up to three days early, said industry attorneys. Issued in August last year, parts of the rules take effect on Oct. 16, 2017, and April 16, 2018. Technically, the “relief” applies...

The Federal Housing Finance Agency proposed minor revisions to its single-family and multifamily housing goals for 2018 through 2020 to push Fannie Mae and Freddie Mac to continue helping low-income borrowers. The FHFA acknowledged that Fannie and Freddie are challenged when it comes to making credit available for the low-income market. Both government-sponsored enterprises have fallen short of the market in the low-income and very low-income purchase goal almost every year since 2013, the regulator noted. Most of the single-family goals would remain...[Includes one data table]

A representative of the Conference of State Bank Supervisors testified before the U.S. Congress recently, telling lawmakers that smaller financial institutions can’t engage in as much residential mortgage lending activity as they otherwise would because of the growing reporting requirements under the Home Mortgage Disclosure Act, as well as the CFPB’s ability-to-repay/qualified mortgage rule. In his testimony before the Senate Banking, Housing and Urban Affairs Committee, Charles Cooper, commissioner of the Texas Banking Department and immediate past chairman of CSBS, said the CFPB’s recent expansion of HMDA reporting requirements has placed a disproportionate burden on smaller and less complex institutions, potentially restricting mortgage lending as well. “In 2018, the number of data points required to comply with HMDA reporting standards ...