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Inside Mortgage Finance

November 8, 2012

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GSE Earnings Slip in Third Quarter, But Fannie And Freddie Both Keep Their Heads Above Water

Fannie Mae and Freddie Mac this week reported a combined $4.74 billion in net income during the third quarter, as the two government-sponsored enterprises avoided taking further draws from the Treasury Department by staying in positive earnings territory. The GSEs’ combined third-quarter income was down 41.7 percent from the previous three-month period, mostly because Fannie’s net income fell 64.6 percent from second-quarter earnings that were pumped up by a $3.04 billion recorded benefit on credit losses. Fannie’s $1.81 billion in third-quarter net income was much more in line with the $2.72 billion it earned in the first three months of the year, as well as Freddie’s recent performance. Freddie reported... Read More

Report Suggesting Potential Taxpayer Bailout Could Resuscitate Debate Over FHA Reform

An adverse independent actuarial report on the FHA’s Mutual Mortgage Insurance Fund would set off another round of debate on higher downpayments, tighter credit and increased insurance premiums, along with dire warnings from lawmakers about a potential FHA taxpayer bailout, according to the Mortgage Bankers Association and other industry observers. The annual FHA actuarial review is expected to be released next week and reportedly has troubling news about the state of the MMI Fund, particularly its capital reserve ratio. The strength of the MMI Fund is conveyed through this capital reserve ratio, which has fallen far below its statutory mandate of 2 percent but has still remained positive in the past three annual actuarial reports. The Department of Housing and Urban Development reassured... Read More

Changes in the Works for Mortgage Servicing Business That Faces Continuing Decline in Debt Outstanding

Three nonbank mortgage servicers moved to strengthen their positions in the market, but several of the top banks in the industry also showed no sign of backing off, according to the latest ranking by Inside Mortgage Finance. While a number of analysts have predicted that banks would flee from the servicing business because of rising operational costs, increased compliance scrutiny and proposed increases in capital requirements, Wells Fargo continued to grow its business. The company reported a total of $1.879 trillion in servicing as of the end of September, up 0.9 percent from the previous quarter. After absorbing Wachovia’s mortgage operations in the third quarter of 2008, Wells relied...[Includes one data chart] Read More

Ocwen: From a Shrinking Special Servicer to Top Five Servicer and Major Originator in Four Years

In the past four years, Ocwen Financial has gone from the 24th-largest residential mortgage servicer with a declining portfolio of distressed mortgages to, on paper, the fifth largest servicer with a portfolio increasing in volume and product type. The growth of the nonbank has involved unique tactics, including a reliance on offshore employees and tax structures. Ocwen handled a $121.8 billion portfolio as of the end of the third quarter, including subservicing, but pending acquisitions of servicing from Residential Capital and Homeward Residential, will push that to $361.7 billion. And Ocwen is... Read More

Experts: ‘Status Quo’ Election Means Obama, Senate Democrats Will Advance Dodd-Frank, CFPB, Not GSEs

Mortgage market watchers should expect “business as usual” from a second Obama administration as the White House and Congressional Democrats are poised to preserve gains under the Dodd-Frank Act, including the Consumer Financial Protection Bureau. Both parties say they want to resolve the conservatorships of the government-sponsored enterprises, but experts say the necessity of addressing budget and tax issues will trump all other considerations next year. “Clearly a second term for the Obama administration would be business as usual as best they can,” explained Timothy McTaggart, partner at the Pepper Hamilton law firm during a pre-election webinar. “I don’t think Dodd-Frank will remain sacrosanct for all time. I think during a second term the [regulatory] agencies will get past the point of having to put the rules out, they will get some feedback and they will start making it known where they see gaps or deficiencies.” Karen Shaw Petrou, managing partner of Federal Financial Analytics, said... Read More

CFPB Finds Significant RESPA, TILA, HMDA Violations, Requires Corrective Remediation

The Consumer Financial Protection Bureau has found “significant non-compliance” during its examinations of mortgage lenders, compelling them to take a variety of steps deemed necessary to be brought into compliance, according to the CFPB’s first report on its examination findings. Violations under the Real Estate Settlement Procedures Act included failures to make proper and complete disclosures to consumers of costs and other terms because of errors in the good faith estimate and HUD-1 settlement statement, the CFPB stated. Truth in Lending Act violations included... Read More

Freddie, MGIC Near Resolution on Pool Insurance Dispute; MIs Sign Short-Sale Agreement with GSEs

MGIC Investment Corp. announced last week it has reached a tentative agreement with Freddie Mac “on substantially all terms of a settlement” of a simmering and prolonged dispute over pool insurance between the mortgage insurer and the government-sponsored enterprise. If MGIC and Freddie are able to agree on matters “significant to final resolution” involving payments to be made to the GSE, it would resolve a coverage dispute that threatened to prevent the MI from backing some loans. “The principal economic terms concerning the amount of payments in settlement of MGIC’s obligations under the policies at issue have been... Read More

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