A new analysis by an economist at the Federal Reserve suggests that the Dodd-Frank Act’s risk-retention requirements won’t adequately address the issues that caused the structured finance market to essentially freeze in 2007. A paper by Alyssa Anderson suggests a deposit insurance-like agreement between investors and private market firms or the government would better protect investors from losses and reduce ambiguity. She stressed that increased uncertainty about securities, the potential length and depth of a downturn and possible government intervention contribute to investors shying away from securitization markets. “Given the presence of ambiguity, the market freeze can persist...

Slowing growth, looser underwriting and increasing regulation are likely to tap the brakes on the joyride U.S. auto lenders have enjoyed in recent years, according to recent research from Standard & Poor’s Ratings Service. “Despite the robust performance of the auto sector in the past few years, we believe bumpier roads may lie ahead,” S&P Credit Analyst Igor Koyfman said in a recent report. “As lenders compete for market share, they have extended loan terms and increased the average financing amount, while yields have declined.” Lenders have also increased...

A broad regulatory relief bill pushed by Sen. Richard Shelby, R-AL, passed the Senate Committee on Banking, Housing, and Urban Affairs last week on a 12-10 party-line vote. While Democrats oppose portions of the bill, they are seeking changes to standards for qualified mortgages similar to those proposed by Shelby. The Financial Regulatory Improvement Act of 2015 would establish a qualified-mortgage safe harbor for certain loans held in portfolio. The main difference between ...

New entrants in the Ginnie Mae issuer community expand access to credit at lower cost, deepen the market for Ginnie mortgage servicing rights and help address the agency’s “too-big-to-fail” issue, said the agency’s top executive. “Our top concern is that issuers have the operational and financial strength to meet issuer/servicer obligations,” Tozer said during the recent secondary market conference sponsored by the Mortgage Bankers Association. The flood of new nonbank issuers into the program has been well documented. While they have diluted the heavy concentration of business in the hands of a few megabanks, many have complex financial structures that are less tested in the marketplace, he said. The pipeline of issuer applicants has dropped dramatically, the Ginnie executive reported. To get approved, an applicant has to show where the cash will come from to ...

Mortgage-related issues will likely play a central role in the end product of financial regulatory relief legislation working its way through the U.S. Senate. For now, though, the measure passed by the Senate Banking, Housing and Urban Affairs Committee last week is really an opening gambit, as congressional staffers confer over technical details and lawmakers horse trade and arm twist. “It’s a starter,” said Bob Davis, head of mortgage markets and the senior lobbyist at the American Bankers Association, speaking of the bill sponsored by committee chairman Sen. Richard Shelby, R-AL, the Financial Regulatory Improvement Act of 2015. “The Shelby bill will be...

The mortgage market faces a big challenge when the Federal Reserve figures out how to unload its massive $1.7 trillion portfolio of agency MBS, but anticipated widening of spreads could at least improve market liquidity. The fixed-income market has seen a sharp decline in trading volume resulting in part from regulatory issues, said Mike Fratantoni, chief economist at the Mortgage Bankers Association, during the group’s annual secondary market conference in New York this week. “Banks have been hoarding liquidity instead of providing it to the market,” he said. Average daily trading volume of MBS has dropped...

Officials involved in the development of the common securitization platform and the single, interchangeable MBS for Fannie Mae and Freddie Mac have vowed not to publicize any timetable for the project. And despite several attempts to get an answer during a panel session at this week’s secondary market conference sponsored by the Mortgage Bankers Association, they stuck to their plan. They went out of their way to stress that they haven’t forgotten about potential non-agency users sometime down the road. But that’s...

In April, the average daily trading volume in agency MBS fell to $187.8 billion, the worst reading of the year and a possible harbinger of problems to come. One market participant, speaking under the condition his name not be used, likened it to MBS buyers “going on strike.” He added: “Right now, you have an illiquid market, and that’s not a good thing.” In December of last year, the MBS trading volume was...

The Senate Banking, Housing and Urban Affairs Committee approved a Republican regulatory relief bill on a strictly partisan vote late this week, with all of the mortgage-finance provisions previously reported intact. Sen. Pat Toomey, R-PA, momentarily offered Fannie Mae and Freddie Mac a “get out of jail free” card, in the form of an amendment addressing capital requirements for the two government-sponsored enterprises, then withdrew it, presumably for use at a future point in time. “This is...

Industry participants, both on their own and with help from the Treasury Department, continue to work on reforms to attract investors to buy new non-agency MBS. Servicing standards will likely play a key role in the reforms, though progress has been slow. The Structured Finance Industry Group published its first RMBS 3.0 “green paper” in August 2014 with a follow-up in November. The Treasury Department has been working with industry participants toward the issuance of a benchmark non-agency MBS since at least September 2014. Analysts at Fitch Ratings stressed...