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Inside Nonconforming Markets

November 6, 2009

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Rating Services Won’t Hinder Issuance of MBS Backed by Higher-Priced Mortgages

The rating services will not require additional credit enhancement for mortgage-backed securities backed by higher-priced mortgages, removing one potential threat to a subprime securitization revival. The Federal Reserve’s recent revision of its Home Ownership Equity Protection Act rules created a new category of “higher-priced mortgages.” A mortgage is “higher priced” if the spread between its... Read More

Mandated Lender-Retention of Credit Risk Debated

The House is again considering requiring lenders to retain a portion of the credit risk on mortgages sold to the secondary market. Proposed legislation would require federal regulators to write new rules requiring originators to retain as much as 10 percent of the credit risk on securitized mortgages. The provision was included in the discussion draft of H.R. 3996, the Financial Stability... Read More

Regulators Target Option ARMs for Mods

Option ARMs are facing increased scrutiny from regulators who warn that the mortgages are “ticking time bombs.” California Attorney General Edmund Brown and the House Oversight and Government Reform Committee recently sent separate letters to option ARM servicers in an effort to increase loss mitigation on the mortgages. Last week, Brown called on 10 servicers to detail their plans to assist option... Read More

HAMP Slowing Ocwen’s Mod Efforts

The Home Affordable Modification Program is expected to eventually be a financial boon for Ocwen Financial, but thus far the program has significantly slowed the servicer’s modification efforts. Ocwen detailed the problems this week during a call with investors regarding its earnings for the third quarter of 2009. Ocwen completed 7,003 mods in the third quarter of 2009, down slightly from the 8,157... Read More

Re-Defaults Expected to be Lower on HAMP Mods

Loans restructured under the Home Affordable Modification Program should re-default at a lower rate than non-HAMP mods, according to analysts at Barclays Capital. HAMP has encouraged servicers to significantly decrease borrowers’ monthly payments, which could limit re-defaults. Most pre-HAMP mods reduced borrowers’ monthly payments by an average of 20 percent to 25 percent, according to Barclays... Read More

Fannie Mae Offers Lease Along with Deed-In-Lieu

Fannie Mae will allow borrowers and tenants with properties transferred through a deed-in-lieu of foreclosure to remain in their homes for up to one year by executing a lease. The Deed-for-Lease program was announced this week and effective immediately. Marianne Sullivan, a senior vice president and single-family chief risk officer at the government-sponsored enterprise detailed the D4L... Read More

High-Rate Racial Disparity Continued in 2008

The racial disparities previously uncovered by data from the Home Mortgage Disclosure Act continued in 2008 as white borrowers and Asian borrowers were less likely to receive higher-rate mortgages than blacks and Hispanics. However, the disparities have rarely led to punishment by federal regulators in recent years. For conventional home-purchase lending in 2008, the incidence of higher-priced lending... Read More

Securitization Key for Return of Non-Prime ARMs

The market for mortgages to low-credit borrowers still exists, but the activity is currently concentrated in FHA lending and securitization via Ginnie Mae. The share of mortgages going to borrowers with credit scores of 660 and below is currently the same as it was at the peak of subprime securitization in 2006, according to new research by the Federal Reserve Bank of San Francisco... Read More

News Briefs

Ohio Attorney General Richard Cordray filed a lawsuit against American Home Mortgage Servicing this week regarding the company’s loss mitigation practices. “The acts of some mortgage servicers have gone beyond the point of being negligent – they have become predatory financial practices and in Ohio, they won’t be tolerated,” Cordray said. According to the lawsuit, American Home required borrowers to... Read More

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