In a long-awaited decision, the United States Court of Appeals for the District of Columbia Circuit ruled this week against Fannie Mae and Freddie Mac shareholders who have been contesting the Treasury Department’s net worth sweep of the government-sponsored enterprises’ earnings. On Feb. 21, Judge Royce Lamberth ruled shareholders in Perry Capital LLC vs. Treasury, et al, are barred by the 2008 Housing and Economic Recovery Act from making their claims. Perry sued...

The U.S. Treasury doesn’t get to invest in the booming stock market, but its stake in two guarantors of mortgage-backed securities is making a killing. Fannie Mae and Freddie Mac posted $9.9 billion in combined profits for the fourth quarter of 2016, and $20.2 billion for the full year. It was up 16.1 percent from 2015 and the fourth best year ever for the two government-sponsored enterprises. Their all-time high was...

The aggregate dollar volume of homeowner equity in real estate has almost returned to pre-crisis levels, but borrowers are no longer using their homes as ATMs, according to industry analysts. Between 2003 and 2007, homeowners were extracting more than $350.0 billion in home equity per year via home-equity loans and cash-out refinances, according to researchers at the Federal Reserve Bank of New York. While home prices and equity have largely recovered, equity extraction remains below $50.0 billion per year. William Dudley, president and CEO of the NY Fed, said...

The Office of the Comptroller of the Currency’s denial of favorable capital treatment to a non-agency MBS issued by JPMorgan Chase last year could hinder efforts aimed at convincing banks to return to the non-agency MBS market, according to industry analysts. JPMorgan Chase issued two unique non-agency MBS last year with a total unpaid principal balance of $4.53 billion. The so-called portfolio risk-transfer deals accounted for a whopping 48.6 percent of the prime non-agency MBS issued in 2016. Chase packaged...

Freddie Mac reported a net income of $4.85 billion in the fourth quarter, more than double its earnings from the previous quarter and lifting its full-year income to $7.82 billion. The government-sponsored enterprise released its earnings this week, posting one of its best profits ever in the fourth quarter. Net income for the quarter was fueled in part by gains on derivatives which amounted to $6.38 billion. “Interest rates went up an unusually large amount in the fourth quarter, therefore you saw an unusually large gain in the accounting,” Freddie CEO Donald Layton told Inside MBS & ABS. Freddie also reported...

Now that investment banker Steven Mnuchin has been installed as the Treasury secretary, work can begin on finding a solution to Fannie Mae and Freddie Mac, the giant government guarantors that serve as the linchpin to housing and mortgage markets. For the most part, senior mortgage officials who have been in the business for a decade or more applauded President Trump’s choice of Mnuchin, pointing to his days as the head of MBS trading at Goldman Sachs & Co. “At the very least, this is...

Weighing in on President Trump’s recent executive order related to the Dodd-Frank Act, analysts at Moody’s Investors Service said ditching the major mortgage regulations promulgated under the law would be negative for residential MBS unless it’s done carefully. “Any significant repeal of the Dodd-Frank Act’s mortgage-related provisions without effective alternatives would weaken residential RMBS credit quality because these provisions have strengthened the credit quality of mortgage originations, improved servicing practices and bolstered the credit integrity of RMBS structures,” the analysts said in a new report issued earlier this week. Their report then detailed...

The chatter about the Federal Reserve shrinking its massive $4.5 trillion balance sheet and its huge $1.7 trillion portfolio of agency MBS has continued in recent days, with one Fed official talking up the idea and another describing how the U.S. central bank plans to do it. Federal Reserve Bank of St. Louis President James Bullard said in a speech last week that the Fed could begin normalizing its balance sheet. “The Fed’s balance sheet has been an important monetary policy tool during the period of near-zero policy rates,” Bullard said. Thus far, the Fed’s Open Market Committee has not set...

A key Republican leader in the House of Representatives is looking to push legislation that would effectively neuter critical aspects of the Consumer Financial Protection Bureau that could lead to major changes in the agency’s oversight functions and capabilities, including mortgage rulemaking, supervision and enforcement. The congressman also indicated he might use a procedural technique related to the budget to ram his legislation past Democrat opponents in the Senate. The legislative vehicle of choice is...

The secondary market for bulk agency mortgage servicing rights is beginning to pick up a decent head of steam, but one factor is holding it back from a full-throttle: worries about prepayment speeds. “We’ve had one month of low prepayment numbers,” said Mark Garland, president of MountainView Servicing Group, Denver. “A couple of more months would be better.” According to investment bankers who work the market, although rates have been on a steady climb since the November election – the yield on the benchmark 10-year Treasury is...