First-lien mortgages held in bank and thrift portfolios increased by 4.1 percent at the end of the second quarter of 2012 compared with the same period in 2011, according to an Inside Nonconforming Markets analysis of bank call report data. The strong increase comes as banks actively sell poorly performing legacy mortgages and suggests that lenders have increased their non-agency portfolio originations. Of the 21 banks and thrifts with at least $10.0 billion in first-lien holdings as of the ... [Includes one data chart]

Special servicers are set to receive more than $300.0 billion in distressed agency mortgages, according to industry analysts. The projections come after positive reviews of Fannie Mae’s controversial purchase and transfer of $73.0 billion in mortgage servicing rights from Bank of America in 2011. The Federal Housing Finance Agency and the FHFA Office of Inspector General each determined that Fannie paid a premium for BofA’s mortgage servicing rights, but significant savings will be recognized due ...

Wells Fargo and Morgan Stanley last week received notices from non-agency mortgage-backed security investors represented by the law firm of Gibbs & Bruns, which helped negotiate the pending $8.5 billion non-agency MBS settlement with Bank of America. Industry analysts suggest that the notices of non-performance could prompt settlements from Wells and Morgan Stanley, though the circumstances differ from the BofA case. The notices identify covenants in pooling and servicing agreements that the servicers ...

Lenders warn that the Consumer Financial Protection Bureau’s proposed changes to stringent rules for “high-cost” mortgages will dramatically restrict credit availability for borrowers. Consumer advocates counter that the CFPB’s proposal to expand coverage of the Home Ownership and Equity Protection Act is appropriate and they are concerned with potential evasion of the pending rule. “The high-cost proposal would inevitably result in the further tightening of credit, even for creditworthy applicants,” ...

The market share for higher priced mortgages doubled in 2011 compared with the previous year, according to an Inside Nonconforming Markets analysis of Home Mortgage Disclosure Act data released last week. However, the market share for the proxy for subprime mortgages used by federal regulators remained tiny at 1.2 percent of the dollar volume of originations reported in 2011. Some $12.38 billion in higher priced mortgages were sold in 2011, up ... [Includes one data chart]

Thomas Hoenig, a director at the Federal Deposit Insurance Corp., last week called for changes to impending Basel III capital standards. Industry analysts have warned that the rules will discourage origination of nontraditional mortgages. “In private discussions I find a good deal of uneasiness about Basel III’s ability to be more effective than previous Basel efforts; however, there is a sense that we cannot go back,” Hoenig said in a speech. “I suggest that we not only can go back, we must.” ...

The major servicers handling non-agency mortgages under the Home Affordable Modification Program have made significant improvements, according to new assessments released by the Treasury Department. None of the nine largest non-agency HAMP servicers were in danger of having incentive payments withheld as of the end of the second quarter of 2012. “Servicers continue to focus attention on areas identified in previous program reviews and, as a result, are demonstrating considerable improvement in ...

Former Massachusetts Governor Mitt Romney aims to replace the Dodd-Frank Act and reform the government-sponsored enterprises, according to the latest housing policy statement from the Republican presidential candidate and Rep. Paul Ryan, R-WI, his vice presidential running mate. “The Romney-Ryan plan will reduce the outsized role of the government and revitalize the private sector’s role in the housing market to end the housing crisis and preserve the American dream of homeownership,” according to ...

The National Credit Union Administration filed a lawsuit this week against Barclays Capital alleging misrepresentations in the sale of non-agency mortgage-backed securities to credit unions that subsequently failed. The NCUA said U.S. Central Federal Credit Union and Western Corporate Federal Credit Union paid more than $555 million for the non-agency MBS in question. Debbie Matz, chairman of the NCUA Board, said Barclays issued faulty disclosures on non-agency MBS it underwrote ... [Includes two briefs]

Poor credit history is still the most cited reason for denying a government-backed, purchase-loan application although collateral appears to be gaining traction due to depressed home values and underwater mortgages, data reported by lenders under the Home Mortgage Disclosure Act indicated. The latest HMDA data showed that 25.0 percent of FHA/VA home purchase loan applicants in 2011 were turned down because of credit history issues, perhaps reflecting tighter FHA underwriting and lenders’ credit overlays, which have resulted in average borrower credit scores of 720 and above on new endorsements. Average borrower credit scores for fully underwritten FHA loans, for example, held steady at ... [1 Chart]