The National Credit Union Administration this week reached settlements with two underwriters of non-agency mortgage-backed securities. The settlements also have implications for non-agency MBS issuers and underwriters facing lawsuits from the Federal Housing Finance Agency. Deutsche Bank Securities agreed to pay the NCUA $145.0 million to reduce losses associated with five failed credit unions. Citigroup also agreed to pay the NCUA $20.5 million to settle similar charges. The settlements included terms stating that the issuers did not admit fault. NCUA Board Chairman Debbie Matz warned that the settlements are...

The Federal Housing Finance Agency’s recent proposal to revamp servicer compensation has received mixed reactions from non-agency participants. High-touch servicers approve of the landscape-shifting fee-for-service proposal but analysts suggest that the system would be much more difficult to establish for non-agency mortgages than for agency loans. Ocwen Financial and other servicers that predominantly handle delinquent mortgages favor the FHFA’s proposal that would significantly increase the fees paid to service delinquent loans and lower the base servicing fee for performing loans, perhaps to...

Mortgage real estate investment trusts, along with investors, urged the Securities and Exchange Commission to maintain certain exemptions for mortgage REITs or risk further housing finance issues. REITs are seen as key in efforts to reduce the federal government’s current support of mortgage finance. “Mortgage-focused real estate investment trusts, such as Redwood, are well-suited to carry out this key mortgage banking business function,” said Andrew Stone, general counsel for Redwood Trust. “However, these companies need to continue to be able to rely on the [SEC] exclusion in order to efficiently and effectively carry out...

A number of real estate investment trusts – besides Redwood Trust – are hoping to issue non-agency mortgage-backed securities in the coming years. PennyMac Mortgage Investment Trust and Two Harbors Investment have taken two significantly different strategies to reach that goal. PennyMac has focused on investing in non-performing whole loans and has established a correspondent lending platform, including some jumbo activity. The REIT is also establishing warehouse lending capabilities, with a roll-out planned by mid-2012. In the near-term...

Recent modifications on non-agency mortgages performed relatively well but mod activity is slowing down, according to new data. The relative lack of activity applies to both the Home Affordable Modification Program and proprietary non-agency mod efforts. About 33.5 percent of non-agency mortgages were delinquent as of the third quarter of 2011, according to LoanPerformance, and 46.0 percent of all non-agency borrowers have negative equity. However, Fitch Ratings found that only 24.0 percent of outstanding non-agency mortgages (measured by loan balance) have been modified at least once, up from 20.0 percent at the...

Two new bills aimed at increasing non-agency activity were introduced in the Senate last week. One would wind down the government-sponsored enterprises while the other would establish a framework for covered bonds. S. 1834, “The Residential Mortgage Market Privatization and Standardization Act” introduced last week by Sen. Bob Corker, R-TN, would gradually reduce the portion of the mortgage-backed security guarantee provided by Fannie Mae and Freddie Mac. Within 180 days of the bill’s enactment, the GSEs could only issue MBS with a guarantee for 90 percent of a bond. The guarantee on...

Three more non-agency servicers agreed with New York’s Department of Financial Services to revamp their servicing practices to address alleged improper servicing. American Home Mortgage Servicing, Saxon Mortgage and Vericrest Financial last week agreed to servicing practices previously agreed to by Goldman Sachs Bank, Litton Loan Servicing and Ocwen Financial. Among other provisions, the agreements require a single point of contact for borrowers and the end of dual-track foreclosures. The servicers also must withdraw any pending foreclosure in which affidavits were inaccurate and... (Includes one data chart)

President Obama this week signed into law a stop gap spending measure, which, among other things, reinstates temporary higher limits for loans insured by FHA. The minibus bill, which combines several appropriations bill, passed the house on a vote of 298-121. The Senate approved previously approved it 70-30. The measure raises the FHA’s maximum loan limit back up to $729,750 after it had fallen to the permanent statutory level of $625,500 on Oct. 1, and extends it through the end of 2013. The new limit is effective immediately. After being extended three times – in 2008, 2009 and 2010 – the higher loan limits finally expired on Oct. 1 this year and were ...

The FHA Mutual Mortgage Insurance Fund for single-family loans again fell short of minimum capital standards, spurring renewed warnings of a taxpayer bailout if losses continue to mount. According to FHA’s annual report to Congress on its financial status and the condition of the MMI Fund, reserves dropped to 0.24 percent in 2011 from 0.50 percent last year. This means that the agency is holding only $2.6 billion of excess reserves, down from $4.7 billion the year before, against roughly $1.1 trillion of FHA-insured loans. The report also noted that unless housing prices stabilize and losses drop, the fund has a 50 percent chance of a taxpayer bailout. The negative effects in the report’s “base case” scenario were caused by ...

Home Equity Conversion Mortgage claims increased by a whopping 48.3 percent in FY 2011 from last year, while the number of loans originated under the program also fell on a year-over-year basis, according to Inside FHA Lending’s analysis of FHA data. HECM claims were up to 7,951 in 2011 compared to 5,361 claims filed under the program the year before.