Two of the three biggest barriers to a return of the non-agency mortgage sector the premium capture cash reserve account and the qualified mortgage definition are embedded in the Dodd-Frank Act, industry officials say. And the third is whats not in the controversial law: any substantive reform of Fannie Mae and Freddie Mac. The biggest challenge to reducing the governments domination of the mortgage market is the lack of direction on the government-sponsored enterprises, said Tom Deutsch, executive director of the American Securitization Forum, during a hearing this week.
A surge in securitization of home purchase-money mortgages during the second quarter was not enough to offset a sizable drop in refinance activity during the first three months of the year, according to a new Inside MBS & ABS analysis and ranking. A total of $372.85 billion of agency single-family MBS was issued during the second quarter, down 3.1 percent from the first three months of 2012. Although securitization of purchase mortgages rose 22.4 percent, partly from seasonal factors as well as firming in the housing market, the volume of refinance loans securitized by Fannie Mae, Freddie Mac and Ginnie Mae declined 10.6 percent.Includes two data charts.
Mortgage securities investors have as much at risk as lenders from the emerging ability-to-repay consumer protection standard because borrowers will be able to challenge compliance with far fewer time restrictions, according to the American Securitization Forum. In a comment letter to the Consumer Financial Protection Bureau, the ASF urged the agency to set objective and clear standards for qualified mortgages which will satisfy the ability-to-repay underwriting requirement imposed by the Dodd-Frank Act and a legal safe harbor. Otherwise, the resulting significant risk and costs of potential litigation will constrain investors from purchasing...
A federal judge in New York has given the go-ahead for a group of investors in an IndyMac Bank MBS offering to proceed as a class in a suit against Credit Suisse, the offerings underwriter. The June 29 ruling by U.S. District Judge Lewis Kaplan granted a December 2010 request for class certification to investors as they allege Credit Suisse misled them about the quality of toxic loans underlying a $642 million MBS offering in 2006. The plaintiffs claim in their suit that the sale of the MBS, Residential Asset Securitization Trust 2006-A8, sponsored by IndyMac Bank, violated the Securities Act of 1933 because the offering falsely represented that the underlying mortgage loans were originated in accordance with IndyMacs underwriting standards.
There is little to no chance of GSE reform bills moving any further in Congress during the remainder of the legislative year, say industry insiders who warn that the political priority for next years Congress will shift from restructuring Fannie Mae and Freddie Mac to scaling back the massive Dodd-Frank Act. For all the sound and fury surrounding Republican-led filing of 25 separate pieces of GSE legislation in the House and Senate during the 112th Congress, nearly all the bills, including six proposals considered comprehensive GSE reform, remain bottled up in committee.
The sooner the Federal Housing Finance Agency acts to clarify Fannie Maes and Freddie Macs positions on what triggers a loan repurchase request, the better it will be for lenders and for the recovery of the housing finance system, industry groups say. Over the past three years, the two GSEs have asked for more than $80 billion in flawed loan repurchases from lenders, prompting an overabundance of underwriting caution, according to Fitch Ratings. Reduced uncertainty around the reasons as well as the timing and remedies available for repurchase may help ease lenders concerns and improve credit availability, said Fitch. Establishing clear and detailed repurchase standards, developing reporting and enforcement mechanisms and creating clear timelines that govern the process would be positive steps and would be welcome by lenders and investors alike.
Freddie Mac announced this week that it has tapped a former JPMorgan Chase executive to serve as the GSEs new head lawyer. William McDavid will start work next week as Freddies executive vice president, general counsel and corporate secretary. He replaces Alicia Myara, who has served as the GSEs interim general counsel since November 2011. McDavid was co-general counsel for Chase from 2004 until he retired in 2006 and previously served solo as general counsel for several Chase predecessors going back to Chemical Bank in 1988.
The Federal Housing Finance Agency said last week it is ready to take its initiative to dispose of GSE and government-held real estate-owned properties to the next level, but a California House Republican is demanding the pilot program skip over his state. The FHFA announced it has chosen winning bidders in its REO pilot venture with the transactions expected to close early in the third quarter. Although the winning bidders werent publicly identified by the FHFA, the agency has declared this first round to be a success and is planning the next round of sales, according to FHFA Acting Director Edward DeMarco.
Despite the full implementation of the recently expanded Home Affordable Refinance Program in June and a refi boost that followed, Fannie Maes and Freddie Macs new volume declined during the second quarter of 2012, according to a new Inside The GSEs analysis. Fannie and Freddie issued $273.95 billion in single-family mortgage backed securities during the second quarter, a 10.2 percent drop from the first three months of the year. Thanks to the huge $305.21 billion of GSE business during the first quarter, the market was still 39.3 percent ahead of the pace set during the first half of 2011.
After months of high-profile publicly and seemingly endless prototypes, consumer testing and discussions with industry stakeholders, the Consumer Financial Protection Bureau this week issued a detailed proposed rule to integrate the mortgage disclosures consumers get under the Real Estate Settlement Procedures Act and the Truth in Lending Act. The proposal features new loan estimate and closing disclosure forms to highlight the costs and risks of a mortgage in terms designed to be clearer to consumers and to facilitate shopping. According to the CFPB...