Fannie Mae and Freddie Mac picked the low-hanging fruit first and sold large chunks of their most liquid “less-liquid” assets during the third quarter of 2013 as the government-sponsored enterprises continued to shift their business away from retained investments. The GSEs reduced their combined holdings of commercial MBS by 32.1 percent during the third quarter, according to a new Inside MBS & ABS analysis of their retained portfolios. The Federal Housing Finance Agency has directed the two companies to accelerate their portfolio trimming by focusing on “less-liquid” assets other than their own MBS. The commercial MBS market has been...[Includes one data chart]

The risk-retention rule re-proposed by federal regulators in September needs significant adjustments, according to issuers of collateralized loan obligations and asset-backed commercial paper. Investors are largely happy with the re-proposed rule, and issuers concede that the re-proposed rule significantly improved on the rule initially proposed by federal regulators in 2011. The Dodd-Frank Act requires federal regulators to establish risk-retention requirements for certain securities that don’t meet qualifying standards. Issuers of such securities will generally be required to retain at least 5.0 percent of the risk from such issuance. “We remain concerned...

A total of $33.16 billion of commercial MBS – including agency MBS backed by multifamily mortgages – were issued during the third quarter of 2013, a new Inside MBS & ABS analysis reveals.

The securitization of income-property mortgages in 2013 remains on track to be the best year since the financial market meltdown, but new issuance dropped sharply during the third quarter. A total of $33.16 billion of commercial MBS – including agency MBS backed by multifamily mortgages – were issued during the third quarter of 2013, a new Inside MBS & ABS analysis reveals. That was down 24.5 percent from the second quarter, but it brought year-to-date issuance to $123.89 billion, just shy of the total securitized in all of 2012. Commercial mortgage securitization through the first nine months of 2013 was...[Includes one data chart]

The Federal Housing Finance Agency should think twice, then disregard any plans to further cut the multifamily business of Fannie Mae and Freddie Mac, according to the ranking member of the House Financial Services Subcommittee on Capital Markets and GSEs. In a letter to the FHFA earlier this month, Rep. Carolyn Maloney, D-NY, noted that since the Finance Agency implemented “an arbitrary” 10 percent cut in GSE multifamily business for 2013, “an additional reduction further depresses the housing market nationwide, reduces the availability of rental housing, and actually harms the financial stability” of Fannie and Freddie by limiting proven revenue-generating opportunities.

Flagstar has finally admitted that it's close to selling a ton of MSRs. But if you want details, don't hold your breath.

MBS issuers and investors endorse many aspects of the revised qualified residential mortgage requirements recently proposed by federal regulators, but there are concerns about requirements for other asset classes included in the new risk-retention proposal. Issuers of non-agency MBS, ABS and commercial MBS backed by collateral that doesn’t meet certain qualifying requirements will have to retain risk on at least 5 percent of the deal, as required by the Dodd-Frank Act. Major industry groups have asked the regulators for more time to weigh the new proposed rule, which set a public comment period that ends Oct. 30. Richard Johns, executive director of the Structured Finance Industry Group, offered...

Rumors abound about mortgage firms either closing or laying off staff. Meanwhile, Auction.com, known for selling troubled real estate for banks and other investors, is offering up a $600 million pool of performing multifamily mortgages.

Fannie Mae and Freddie Mac may have to dial back the multifamily spigot if they’re going to meet the targets their regulator wants them to as it seeks to shrink the GSEs’ presence in the space. It looks like it might require a bigger turn of the dial for Freddie than for Fannie. As part of the Federal Housing Finance Agency’s 2013 Conservatorship Scorecard, FHFA Acting Director Edward DeMarco has called for a 10 percent reduction target in GSE multifamily business volume this year compared to 2012.

It's not looking pretty for gain-on-sale margins this quarter. However, interest rates will remain low.