The average daily trading volume in agency MBS totaled $236.1 billion in January, the highest reading of the past year, and a sign that liquidity is strong. Compared to the month prior, trading activity increased by 12.8 percent, according to the Securities Industry and Financial Markets Association.

The credit-risk transfer market created in recent years by Fannie Mae and Freddie Mac is better poised to warn of systemic risk than the MBS market was prior to the financial crisis, according to new research by Susan Wachter of the University of Pennsylvania’s Wharton School.

Ginnie Mae this week warned nine VA lenders suspected of engaging in loan churning to each develop a plan to slow the rapid pace of prepayments they have triggered in the agency’s securitized loan pools. According to Ginnie, the issuers were directed individually to deliver correction action plans containing measures that could be deployed immediately to bring prepayment speeds in line with market peers. The agency told issuers they would be barred from multi-issuer pools if they do not come up with a plan. Participation would be allowed only in the agency’s custom pools. The latest action builds off the Ginnie Mae/VA Loan Churn Task Force, which has been working since September to resolve the churning problem. “We have an obligation to take necessary measures to prevent the lending practices of a few from impairing the performance of our multi-issuer securities, and thus raising the ... [ Chart ]

The Department of Veterans Affairs will require lenders to provide early disclosures to veterans seeking to refinance into a VA Interest Rate Reduction Refinance Loan. The new policy aims to ensure that the VA streamline refi loan they sought would actually lower their monthly mortgage payments and is not just a scam for lenders to charge higher fees. Loan churning, or serial refinancing, is at the root of the VA policy change. Churning refers to multiple refinancing of an unseasoned mortgage loan within a very short time, often within six months of origination. Serial refinancing may add more payments and interest to the new loan, prolonging debt repayment, and can strip equity. It also potentially raises the risk of default by the borrower. In addition, the risk of prepayment could affect pricing of Ginnie Mae securities, which could cause lenders to charge higher rates on VA loans to make up for the ...

FHA delinquencies rose sharply in Puerto Rico following the devastation brought by hurricanes Maria and Irma last year. At the end of 2017, 28.8 percent of FHA mortgages on the island were at some stage of delinquency, including 15.8 percent that have fallen 90 days behind on their mortgage payments. Deutsche Bank Securities analysts believe the spike in delinquency rates overall is “a short-term phenomenon.” They noted that FHA, Fannie Mae and Freddie Mac have declared temporary moratoria on evictions and foreclosures in Puerto Rico and other hurricane-ravaged regions. Issuer exposures in devastated areas remain unclear and Ginnie Mae has not updated its MBS hurricane exposure data since October last year. In the initial disclosure, the agency reported 9.7 percent (1,066,028 loans) of its total MBS portfolio were impacted by Harvey, Irma and Maria. The affected loans’ unpaid principal ...

Fannie Mae and Freddie Mac saw declines in the flow of purchase and refinance loans into single-family mortgage-backed securities last month, starting 2018 on a sour note. The two GSEs produced a total of $67.48 billion of new single-family MBS in January, according to a new Inside The GSEs analysis and ranking. That was down 8.8 percent from the previous month and off 26.4 percent from January 2017. It was the GSEs’ weakest monthly output since May 2017, and it would have been worse had Fannie not come up with $4.69 billion in mortgage securities backed by modified loans. Including those mod-backed deals, Fannie issuance was up 5.0 percent from December. Without them, the company’s new MBS issuance fell 5.7 percent in January.

The daily trading volume in agency MBS averaged $209.1 billion in 2017, the best showing in four years, according to the Securities Industry and Financial Markets Association.

Statistical sampling, which gained widespread acceptance in MBS repurchase cases after the housing crisis, is being rejected in many courts today, legal experts say.

Ginnie Mae set records for new issuance of single-family mortgage-backed securities in 2015 and 2016, but production sagged last year, according to a new analysis and ranking by Inside FHA/VA Lending. The agency issued $443.20 billion of MBS backed by forward single-family mortgages in 2017, a 10.8 percent decline from the previous year. Including FHA reverse mortgages and that are not truncated, 2017 issuance fell 10.3 percent to $455.00 billion. Meanwhile, the private mortgage insurance business – based on Fannie Mae and Freddie Mac MBS data – saw a smaller decline of 5.0 percent from 2016 to last year. The VA program generally held up better than the FHA program during the fourth quarter, when refinance lending was climbing. But the FHA had a better year overall despite some loss of market share in purchase-mortgage activity. Deliveries of FHA loans into ... [ Charts ]

S&P Global was the most active rating service in the non-mortgage ABS market during the first nine months, having graded $95.88 billion in new issuance, or 58.5 percent of the market, according to a new Inside MBS & ABS analysis.