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Inside MBS & ABS

November 18, 2011

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Federal Regulators Failing to Analyze Impact of Implementing Dodd-Frank Regulations, GAO Finds

The Government Accountability Office recently confirmed the view widely held in the mortgage finance industry that federal regulators are not doing enough to analyze the cost and other effects of implementing the Dodd-Frank Act. “Little is known about the actual impact of the final Dodd-Frank Act rules, given the short amount of time the rules have been in effect,” the GAO said. The government watchdog noted that federal financial regulators are required to perform a variety of analyses, but the requirements vary and none of the regulators are... Read More

DeMarco: Senate GOP Bill to Wind Down Fannie, Freddie By Gradually Reducing GSE Guarantees ‘Reasonable’

A proposed Senate bill to steadily wind down Fannie Mae and Freddie Mac over the course of a decade appears to have some support at the Federal Housing Finance Agency, where the acting director is eager for Congress to move toward resolving the three-year-old conservatorships of the two government-sponsored enterprises. S. 1834, the Residential Mortgage Market Privatization and Standardization Act of 2011 would gradually reduce the two GSEs over 10 years through an unusual mechanism. Instead of guaranteeing the entire MBS trust as they... Read More

Freddie to Begin Selling Securities Backed By Re-Performing Loans From Portfolio

Freddie Mac this week announced a new class of single-family MBS backed by mortgages previously repurchased from MBS because they were in serious delinquency. Both government-sponsored enterprises began aggressively buying seriously delinquent loans out of their MBS trusts at the beginning of 2010 because new accounting rules required them to consolidate all their outstanding MBS on their balance sheets. Buying the distressed loans out of the MBS trusts had no impact on their financial accounting, but it allowed them to better manage... Read More

No Surprises in HARP 2.0 Details Lead Analysts To Project Modest Impact on MBS Market

Although primary market lenders will face fewer hurdles in originating refinance loans for underwater Fannie Mae and Freddie Mac borrowers, detailed guidelines released by the government-sponsored enterprises this week confirm that it will take several months before the expanded programs are fully implemented. And when they are, the revamped Home Affordable Refinance Program will generate up to one million new loans that otherwise wouldn’t have happened, according to estimates by Keefe, Bruyette & Woods. That’s just about what the market expected, and it will mean... (Includes one data chart) Read More

U.S. Structured Finance Losses Ultimately Expected To Reach $376 Billion, Mostly Because of RMBS

Four years after the credit crisis, analysts at Fitch Ratings expect eventual losses from structured finance transactions to soar from current levels, about $94 billion, or 2.7 percent of the original balance of rated transactions, to $376 billion, or 10.6 percent, by the time the dust settles. And the primary culprit, of course, is residential MBS. “Fitch expects a further 9,754 tranches to not recover their full principal, representing 33 percent of all tranches and increasing the proportion of tranches with realized or expected losses to 63 percent of the total... Read More

As More Mortgages Go Underwater, Strategic Default Decisions Spread Like a ‘Disease,’ Says Industry Study

An underwater borrower’s strategic decision to default on a mortgage is triggered not only by economic conditions but how fast the notion can be transmitted throughout a society, which could either result in a full market recovery or a systemic collapse, according to a new mortgage industry study. The study, Strategic Default in the Context of a Social Network: An Epidemiological Approach, suggests that the key to understanding strategic default is to look at it in terms of a disease and how contagious it is. “As social animals, humans knowingly or otherwise look to their peers before... Read More

Credit Union Regulator Settles Lawsuits With Underwriters That Sold MBS to Failed Institutions

The National Credit Union Administration this week announced settlement agreements with Deutsche Bank Securities and Citigroup stemming from their roles as underwriters that sold non-agency MBS to credit unions that eventually failed. Deutsche Bank is paying the bigger amount, $145.0 million, while Citi’s payment will be $20.5 million. Neither firm admitted fault as part of the settlement. The proceeds from the settlements will be used to offset assessments that the NCUA has levied against credit unions to pay the cost of cleaning up the failures of... Read More

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