Mortgage lenders need to get a better understanding of their business in todays economic and regulatory environment and be able to make important decisions quickly in order to stay competitive, according to industry experts. Having more thoughtful insight into the mortgage business lies in the ability of a lender to go deep into its mortgage portfolio and see the risks and opportunities. The key to improving portfolio performance, experts say, is better analytics and using solutions to maximize the value of the portfolio. Today, banks are forced to redefine their loan accounting reporting in light of new regulatory requirements and expectations of...
States are moving quickly to implement laws and regulations facilitating eExamination of mortgage lenders, leveraging technological innovation to bring the industry closer towards the goal of self-examination and self-regulation. We are close to 30 states that are doing eExaminations, and were trying to bring on additional states as we move forward, said Michael Chan, vice president of technology vendor Compliance Ease. One of the reasons why I would say were reaching a tipping point is that state regulators are conducting limited-scope electronic exams, he added. The idea behind that is...
In a proposal that could reshape the economics and competitive landscape of the mortgage industry, the Federal Housing Finance Agency this week proposed two alternatives for servicing compensation on future Fannie Mae and Freddie Mac business that could end up being the model for the market beyond the government-sponsored enterprises.As the recent problems in managing mortgage delinquencies suggest, the current servicing compensation model was not designed for current market conditions, said FHFA Acting Director Edward DeMarco. The goal of this joint initiative is to explore alternative models for single-family mortgage servicing compensation that...
The Federal Housing Finance Agency found itself on the defensive this week following a rapid-fire series of highly critical reports issued by its inspector general that questioned the agencys capacity to oversee Fannie Mae and Freddie Mac effectively, as well as its decisions in specific cases. The FHFA Office of Inspector General said late last week that the FHFAs examination program, the primary means by which it supervises and regulates the government-sponsored enterprises, faces capacity and transparency shortfalls. The agency has too few examiners to ensure the efficiency and effectiveness of...
As state regulators ratchet up their examinations of licensed mortgage companies, lenders are beginning to look for a way to raise concerns and ask questions during the evaluation. Such a mechanism might take the form of an ombudsman or neutral feedback loop that would allow for clarification. The exam process is supposed to be about regulatory compliance and operation soundness. Right now, theres no way for licensed mortgage companies to go back to the [Conference of State Bank Supervisors] to get questions answered or provide real-time feedback, noted Donald Lampe, the leader of Dykemas financial...
A proposal from federal regulators to change servicer compensation on future Fannie Mae and Freddie Mac MBS to a fee-for-service model could also end up addressing a major investor beef about the non-agency MBS market: poor servicing of distressed loans and misaligned interests. The Federal Housing Finance Agency this week released a discussion paper outlining a radical change from an existing system that pays Fannie and Freddie servicers a minimum servicing fee regardless of the loan status. The proposed system features a low flat fee for handling performing loans with increased compensation for...
The share of mortgage loans that were held in portfolio rather than sold into the secondary market rose for the second consecutive year in 2010, but that may have more to do with the peculiarities of the rules for complying with the Home Mortgage Disclosure Act. A Federal Reserve analysis of the lastest HMDA data found that portfolio lending, especially involving owner-occupied refinance loans, has risen since the beginning of 2009 but is still far short of the levels portfolio lenders achieved in 2004 and 2005. Overall, originators held a total of 1.30 million mortgages in portfolio in 2010, with...
The Securities and Exchange Commission is considering launching a civil injunctive action against Standard & Poors Rating Services, alleging violations of federal securities laws with respect to the companys ratings for a 2007 collateralized debt obligation. According to a Form 8-K filing this week by McGraw-Hill, the rating services parent, the federal agency is looking into S&Ps rating of Delphinus CDO 2007-1, which was to be mostly backed by non-agency residential MBS. In connection with the contemplated action, the [SEC] staff may recommend that the commission seek civil money penalties, disgorgement of fees and...
The Securities and Exchange Commission this week approved a proposed conflict-of-interest rule that attempts to walk a tightrope between preventing abusive securitization practices and not interfering with legitimate competitive activity in the market. The agency got a lot of feedback on how to implement the Dodd-Frank Act conflict-of-interest provisions, including from the chief sponsors of the provisions in Congress. Senate Democrats Jeffrey Merkley (OR) and Carl Levin (MI) were largely inspired by dealings in which Goldman Sachs allegedly allowed a hedge fund to choose assets for a collateralized debt obligation and then...
Recent proposals by the Securities and Exchange Commission could eliminate or impose more regulatory burden on mortgage real estate investment trusts and complicate securitizations, experts warned. The SEC earlier this month launched a preliminary effort to reconsider the exemption that REITs currently have from the Investment Company Act. Although the agency did not propose any specific changes, the REIT industry and its supporters see the initiative as a potential game-changer for how they do business. The SEC concept release, at first blush, appears to signal impending regulatory burdens for mortgage REITs and to...