The conforming mortgage market continued to dominate new loan originations during the third quarter of 2012, accounting for a whopping 85.7 percent of the period’s robust $475 billion in new originations, according to a new Inside Mortgage Finance analysis and ranking. The conforming market – which includes loans with government insurance and conventional mortgages up to the eligible loan limit for Fannie Mae and Freddie Mac – represented 84.5 percent of new originations in 2011. During 2010, the conforming market accounted for a record 90.1 percent of new loan production. The jumbo sector made...[Includes two data charts]

The mortgage banking industry will support reasonable efforts to protect the FHA Mutual Mortgage Insurance Fund as long as the changes don’t expose FHA lenders to onerous liability risk and treble damage claims, which could force them to limit or curtail their FHA lending, said the Mortgage Bankers Association. MBA President and CEO Dave Stevens said appropriate protections for the FHA are clearly needed, but they should not go so far as to shut down or restrict access to affordable credit and sustainable homeownership, particularly for first-time homebuyers. He said the industry is most concerned with FHA proposals to seek authority from Congress to extend indemnification requirements to all direct endorsement (DE) lenders and for an amendment to eliminate the “knew or should have known” standard with regard to fraud or misrepresentation. Both proposals are...

Federal Reserve Chairman Ben Bernanke late last week reiterated his view that tight underwriting standards set by lenders are hindering a broader recovery of the housing market. Lenders, meanwhile, cite concerns with repurchases and regulatory uncertainty. Bernanke noted that low home prices and historically low interest rates have not prompted the “powerful housing recovery” that has typically occurred in the past after housing problems. “Unfortunately, while some tightening of the terms of mortgage credit was certainly an appropriate response to the earlier excesses, the pendulum appears to have swung too far, restraining the pace of recovery in the housing sector,” he said. More than half of the lenders that responded to the Fed’s senior loan officer opinion survey earlier this year said...

The recent actuarial report that showed the FHA’s insurance fund is underwater to the tune of $16.3 billion ought to sound an alarm for policymakers to refocus the agency on its original public mission, some leading policy experts say, and perhaps even motivate them to resolve Fannie Mae and Freddie Mac while they’re at it. “I think FHA’s financial condition is extremely precarious – much worse than FHA and HUD are making it out to be,” said long-time critic Edward Pinto, a resident fellow at the American Enterprise Institute, a conservative think tank in Washington, DC, and a former official at Fannie Mae. As he sees it, today’s very low interest rate environment means the economic value of FHA’s forward mortgage fund really is a far worse at a negative $31 billion. “And when you throw in the negative on the reverse [mortgage] program, you get close to $35 billion.” Compounding the problem is...

The Federal Housing Finance Agency is feeling some serious pushback from lawmakers, industry groups and even homeowners over its plan to impose a guaranty fee hike on several slow foreclosure states. The FHFA proposed to target five states – Connecticut, Florida, Illinois, New Jersey and New York – for an additional, one-shot g-fee of between 15 and 30 basis points in 2013. The fees, the FHFA contends, are intended to allow Fannie Mae and Freddie Mac to recover costs associated with foreclosures. The five states singled out are all judicial states where it is necessary to obtain court approval before foreclosure is completed. The National Association of Federal Credit Unions urged...

The Federal Housing Finance Agency should go back and make additional tweaks to the revised representation and warranty framework for Fannie Mae and Freddie Mac to address significant industry concerns while also enabling greater industry input for future government-sponsored enterprise guidelines prior to issuance, according to the Mortgage Bankers Association. In a letter dispatched to the agency earlier this month, the MBA lauded the FHFA for its efforts through the framework to create clarity but said further changes need to be made to avoid adding to lenders’ confusion rather than alleviating it. “MBA is concerned...

The Making Home Affordable program might not tap even half of the $29.9 billion in Troubled Asset Relief Program funds allocated for it, according to new estimates from the Treasury Department. Recently loosened requirements for the Home Affordable Modification Program Tier 2 could increase activity, though initial signals suggest that the increase will not be significant. Some 1.30 million MHA actions had been implemented as of the end of the third quarter of 2012, up from 1.22 million at the end of the second quarter, according to an Inside Mortgage Finance analysis. First-lien mods as part of HAMP Tier 1 dominated MHA activity, which also included second-lien mods, short sales and unemployment forbearance plans and other programs. There were...

Securitization market professionals are jointly promoting the practice of “margining” transactions involving Fannie Mae, Freddie Mac and Ginnie Mae MBS, despite the costs involved, to reduce counterparty and systemic risks. Last week, the Treasury Market Practices Group revised its existing “best practices” for Treasury, agency debt and agency MBS markets to include a recommendation that forward-settling agency MBS transactions be margined in order to prudently manage counterparty exposures. “In order to allow market participants to develop...

Refinancing of underwater and nearly submerged Fannie Mae and Freddie Mac mortgages continued to spur business at the government-sponsored enterprises during the third quarter. During the third quarter of 2012, the two GSEs securitized a total of $66.91 billion of refinance mortgages with loan-to-value ratios exceeding 85 percent, a proxy for business originated under the Home Affordable Refinance Program. That was up 13.3 percent from the second quarter, according to an Inside MBS & ABS analysis of loan-level securitization data. Official HARP data are reported...[Includes two data charts]

Look for the 113th Congress and to a lesser extent a second-term Obama administration to become more engaged in seeking a resolution to Fannie Mae’s and Freddie Mac’s future role in the mortgage market, although implementation of such a solution remains years away, say industry observers. In the short term, following a hard-fought 2012 election that left the balance of power and the political party makeup unchanged, official Washington will be primarily focused on averting the looming “fiscal cliff” of tax hikes and automatic spending cuts.