Federal regulators revealed this week that they are considering changing proposed Basel III capital requirements for available-for-sale securities. Banks have raised concerns about the proposed treatment of available-for-sale securities, which could cause capital volatility and force sales of debt tied to the government-sponsored enterprises and the Treasury Department. In June, federal regulators proposed changes to the treatment of accumulated other comprehensive income that would require unrealized gains and losses on available-for-sale securities to flow through to regulatory capital as opposed to the current treatment, where unrealized losses generally do not affect a bank’s regulatory capital. At a Senate Banking, Housing and Urban Affairs Committee hearing this week, Michael Gibson, director of the Federal Reserve’s division of banking supervision and regulation, indicated...

The Federal Reserve appears likely to continue to maintain an arguably oversized footprint in the secondary mortgage market in its effort to foster the gradually improving housing market, analysts say. “Our view is that the Fed continues its purchase of agency MBS at least to the end of 2013,” said Ankur Mehta, an MBS analyst with Citigroup. “The fact that the market is now talking about QE 4 and Treasury space, you can say that further argues they’re going to stay the course in the mortgage space because they’re still looking to ease their monetary policy.” The Fed’s actions have improved...

Look for the 113th Congress and to a lesser extent a second-term Obama administration to become more engaged in seeking a resolution to Fannie Mae’s and Freddie Mac’s future role in the mortgage market, although implementation of such a solution remains years away, say industry observers. In the short term, following a hard-fought 2012 election that left the balance of power and the political party makeup unchanged, official Washington will be primarily focused on averting the looming “fiscal cliff” of tax hikes and automatic spending cuts.

Reportedly dire findings of the annual independent audit of the FHA insurance fund due for release late this week may set off alarms in Congress and calls for reform but not a taxpayer rescue as some FHA critics have suggested, according to the Mortgage Bankers Association. Recent news reports indicated that the fiscal 2012 actuarial review of the FHA’s Mutual Mortgage Insurance Fund will show a negative economic value or capital reserve position, which some say could require the Treasury to bail out the FHA to boost its claims-paying ability. There is speculation that the fund could go from a predicted economic value of positive $9.4 billion in last year’s study to as much as negative $10 billion this year. A deficit should not be...

Federal regulators working to establish Basel III capital requirements for banks this week appeared to be more concerned about how community banks will cope with the controversial rule than its potential negative impact on the mortgage market. Late last week, federal regulators announced that implementation of Basel III capital requirements is not expected to begin on Jan. 1, 2013, as initially planned because rules proposed in June have yet to be finalized. In a hearing at the Senate Banking, Housing and Urban Affairs Committee this week, staff for the Federal Reserve, Office of the Comptroller of the Currency and Federal Deposit Insurance Corp. stressed that they are still reviewing more than 1,500 comments and that a final rule is far from complete. Community banks filed...

Four associations representing state financial regulators told the CFPB they generally support most of what the bureau is proposing in integrating the disclosures consumers receive when they shop for a mortgage. However, they emphasized the importance of proceeding cautiously as the bureau moves ahead with the proposed rules that would amend the mortgage disclosures under Regulation Z, which implements the Truth in Lending Act, and Regulation X, which implements the Real Estate Settlement Procedures Act...

The CFPB and the federal banking regulators have jointly written a key panel in the U.S. Senate to express their opposition to legislation that would permit the president to require all independent agencies to undertake numerous additional steps and analyses as part of the rulemaking process. Introduced by Sens. Mark Warner, D-VA, Rob Portman, R-OH, and Susan Collins, R-ME, S. 3468, the “Independent Agency Regulatory Analysis Act of 2012,” would authorize the president to require independent regulatory...

The CFPB and the Federal Housing Finance Agency, the regulator and conservator of Fannie Mae and Freddie Mac, have agreed to work together on setting up a National Mortgage Database, something officials hope will be the first comprehensive repository of detailed mortgage loan information. The National Mortgage Database is to include information spanning the life of a mortgage loan from origination through servicing and incorporate a variety of borrower characteristics. Specifically, the database will feature...

The United States just concluded an electoral campaign season that involved the expenditure of billions of dollars and resulted in no change in the balance of power on the federal level, beyond strengthening Democrats’ control in the U.S. Senate. But that doesn’t mean nothing important is going to happen over the next four years. Securitization industry officials, Washington insiders, political observers and policy wonks all expect hard financial realities to compel policymakers into responding to a host of issues that will significantly affect housing finance and securitization. “We don’t think the ‘status-quo election,’ as some have called it, means status quo for residential mortgage finance,” said Karen Shaw Petrou, a managing partner at Federal Financial Analytics, a Washington, DC, think tank. She thinks...

Fannie Mae and Freddie Mac continued to trim their retained holdings of MBS and unsecuritized mortgages during the third quarter, but at a slower pace than in previous periods, according to an analysis by Inside MBS & ABS of earnings reports released this week by the two government-sponsored enterprises. One of the conditions of the conservatorships the GSEs entered four years ago was that they would reduce their retained mortgage portfolios by 10 percent a year. Those terms were revised in August to include a 15 percent annual wind-down, which would take each GSE’s investment portfolio down to $250 billion by the beginning of 2018, four years sooner than under the previous arrangement. As Freddie noted...[Includes one data chart]