Secondary market investors interested in branching out beyond plain vanilla mortgage products are not going to have much to get excited about once the Consumer Financial Protection Bureau’s new ability-to-repay rule kicks in next year, top legal experts suggested this week. “Will lenders make rebuttable presumption qualified mortgages? Remember, [lenders] are free to make loans that generally satisfy the ATR standard. We don’t think those are going to be very common. We don’t think they are going to be saleable in the secondary market at this point in time from what we know today,” Donald Lampe, leader of the financial services regulatory and compliance practice with the Dykema law firm, told participants in a webinar hosted by Inside Mortgage Finance, an affiliated newsletter. As he sees it, the real issue boils down...

Municipalities determined to follow through with a proposal to use local government eminent domain powers to nullify existing mortgage contracts of underwater borrowers should expect a swift response from the government conservator of Fannie Mae and Freddie Mac, warns an industry insider. Last week, executives of San Bernardino County, CA, voted to reject a proposal to use eminent domain to seize mortgages with negative equity to affect a principal reduction for borrowers. The decision was reportedly based on expert warnings about the destabilizing effect on the housing market such a policy would have, as well as a conspicuous lack of public support.

A senior House Democrat has again filed legislation seeking a Congressional investigation of Fannie Mae’s and Freddie Mac’s past and present management and decision making authority.Filed by Rep. Marcy Kaptur, D-OH, in mid-January, H.R. 234, The Fannie Mae and Freddie Mac Investigative Commission Act, would empower a Congressional body to “investigate the policies and practices engaged in by officers and directors at Fannie Mae and Freddie Mac responsible for making the decisions that led to the enterprises' financial instability and the subsequent Federal conservatorship” of the two GSEs. The Fannie Mae and Freddie Mac Investigative Commission would be composed of eight lawmakers – appointed by House and Senate leaders from both political parties – to examine the practices, decisions and policies of the two GSEs that affect the financial stability of the mortgage firms.

A number of mortgage industry experts share the view that a dark cloud has been cast over President Obama’s recess appointment of Richard Cordray as director of the Consumer Financial Protection Bureau, after an appeals court ruled late last week that other recess appointments the president made at the same time were unconstitutional. “The significance of this decision cannot be overstated as it raises a host of questions about the potential impact of a judicial ruling that Mr. Cordray’s recess appointment was similarly invalid,” said Barbara Mishkin, of counsel with the law firm of Ballard Spahr. Edward Mills, a financial policy analyst at FBR Capital Markets, said...

The agency share of mortgage originations is expected to remain elevated for years to come due to profits at the government-sponsored enterprises, increasing home prices, a lack of non-agency production, and the new ability-to-repay rule, according to industry participants. The factors have combined to reduce the push for the Obama administration and Congress to take action on GSE reform. The most recent impediment to GSE reform appears to be new profits reported by Fannie Mae and Freddie Mac, along with expected profitable quarters going forward due to repurchase settlements, home price appreciation and other positive trends. “The Treasury Department has...

With the official opening of the 113th Congress and the Obama administration’s second term to commence next week, the two key congressional committees overseeing mortgage and housing issues are reorganizing their membership rolls. But it remains to be seen whether lawmakers will be any more successful at advancing legislative GSE reform than during the previous two-year session. As expected, Rep. Jeb Hensarling, R-TX, has assumed the gavel of the House Financial Services Committee, replacing the term-limited former chairman Spencer Bachus, R-AL, who will remain on the committee as chairman emeritus. Rep. Gary Miller, R-CA, will serve as vice chairman of the committee, while Rep. Lynn Westmoreland, R-GA, will serve in the newly created position of committee whip.

The Consumer Financial Protection Bureau this week issued a long-awaited final rule that establishes ability-to-repay and qualified mortgage (QM) standards, as well as a second, temporary category of QMs for government-backed mortgages to avoid market disruption. At the same time, the CFPB sought comment on a proposed rule that would exclude new and existing FHA, VA and Rural Housing Service (U.S. Department of Agriculture) programs that facilitate refinancings for borrowers at risk of delinquency or default. The temporary QM category was spurred by CFPB’s concern about the ...

Although Congress’ and the president’s just-in-time agreement to forestall the fiscal cliff crisis, at least for a while, provided some mortgage market-friendly results, MBS investors still face some challenges in 2013, analysts say. The American Taxpayer Relief Act, H.R. 8, includes a one-year extension through Dec. 31, 2013, of the Mortgage Debt Forgiveness Act that exempts loan amounts forgiven by lenders and foreclosures from taxable income. Deductions on mortgage insurance premiums for borrowers making below $110,000 were extended through 2013 and made retroactive to cover 2012, as well. “The combination of tax relief on mortgage insurance premiums and debt forgiveness should have...

Proponents of creating a covered bond market in the U.S. say the prospects of such a move have never looked better in the wake of legislative momentum in Congress, the off-year election year and the adoption of a covered bond framework in Canada. Last month, Canada’s national housing agency announced details of the legal framework for the issuance of Canadian covered bonds. Under the framework, registered covered bonds will be issued through a program that will be run by the Canada Mortgage and Housing Corp. The Canadian framework will operate...

Mortgage industry participants are confident that newly confirmed FHA Commissioner Carol Galante will deliver on reforms she committed to in an effort to reach out to Republican critics. Eighteen Senate Republicans veered away from their hardline party colleagues to help Carol Galante secure confirmation of her nomination as the Department of Housing and Urban Development’s chief overseer of the FHA mortgage insurance program and overlord of housing policies. Galante broke through the GOP firewall Dec. 30 after the Senate voted 69 to 24 to approve her nomination. She needed at least 60 votes to ...