The Federal Reserve Bank of New York will ask its primary dealers, as part of best practices, to raise their upfront cash collateral for MBS trades. A NY Fed spokesman denied that the change in collateral requirements was a reaction to the recent collapse of MF Global, a primary dealer. Since its last foray into the agency MBS business in 2010, the agency has been considering raising the margin for MBS deals, he said. The spokesman said a best practices guidance issued by the NY Fed’s Treasury Market Practices Group in September 2010 requires trading desks to consider...

The Federal Housing Finance Agency earlier this month issued a proposed rule to require the Federal Home Loan Banks to “monitor and assess the eligibility” of each Bank member for access to long-term advances through compliance with the Community Reinvestment Act and the member’s first-time homebuyer standards.To maintain access to FHLBank long-term credit and community investment products, Bank members are required to submit a community support statement to the FHFA every two years to document their CRA performance and record of lending to first-time homebuyers.

ABS issuers are scrambling to get a handle on complex new rules to mitigate conflicts of interest in the structured finance market that are being developed by the Securities and Exchange Commission and federal banking regulators. “At the end of the day, we’ll spend lots of time figuring out how to comply,” said Bianca Russo, managing director and associate general counsel at JPMorgan Chase, during a seminar sponsored last week by the American Securitization Forum. “It’s going to be a challenge to comply, however the rules turn out.” Complexity and consistency are...

A reduction to the Federal Home Loan Bank system’s advance business and investment portfolio would diminish Bank profitability, resulting in a credit negative for U.S. commercial banks, according to a recent report by Moody’s Investors Service. “Limiting access to FHLBank funding would reduce alternative liquidity for U.S. banks,” noted the Moody’s report “A Diminished Federal Home Loan Bank System Would Weaken U.S. Banks.”

For an all too brief moment last week there was bipartisanship on Capitol Hill as exasperated Democrats and Republicans took turns questioning and berating the CEOs of Fannie Mae and Freddie Mac and their regulator surrounding the issue of executive compensation at the two GSEs.Federal Housing Finance Agency Acting Director Edward DeMarco was called before the Senate Banking, Housing and Urban Affairs Committee and the House Committee on Oversight and Government Reform to explain some $13 million in performance bonuses to Fannie CEO Michael Williams and Freddie CEO Charles Haldeman and eight other senior executives at the taxpayer-subsidized firms.

Mortgage banking earnings improved significantly during the third quarter of 2011 on both the production and servicing sides of the business, according to a new analysis by Inside Mortgage Trends. A sample of nine mortgage banking firms showed a combined $2.26 billion in production-related income during the third quarter. That reversed a disastrous $11.97 billion combined loss on production during the second quarter of 2011. The group’s second-quarter results were skewed by Bank of America’s stunning $13.21 billion net loss on production income during...(Includes one data chart)

Despite low mortgage rates, the outlook for the purchase-mortgage market remains gloomy. And you can blame it mostly on current housing market conditions. One of the biggest problems plaguing the housing market, according to the Campbell/Inside Mortgage Finance HousingPulse Tracking Survey, is the large share of distressed properties that make up home sales in most areas of the country. Nationally, foreclosed properties and short sales accounted for a whopping 48.4 percent of home purchase transactions tracked in the HousingPulse Distressed Property Index during...

Employment and income fraud risk has been steadily rising since 2009. Analysts at Interthinx attribute the growing risk to the misrepresentation of borrower data to meet the tighter debt-to-income ratios that lenders now demand. The Mortgage Fraud Risk Report shows that employment and income fraud risk in the third quarter was up 8.8 percent from the same period last year, and up 50.0 percent from the third quarter of 2009. One thing that doesn’t change is the states that have the highest exposure to this fraud; Nevada, the riskiest state, has an index value of 255, and Arizona comes in a close second with an index of 243. These...

Four years after the credit crisis, analysts at Fitch Ratings expect eventual losses from structured finance transactions to soar from current levels, about $94 billion, or 2.7 percent of the original balance of rated transactions, to $376 billion, or 10.6 percent, by the time the dust settles. And the primary culprit, of course, is residential MBS. “Fitch expects a further 9,754 tranches to not recover their full principal, representing 33 percent of all tranches and increasing the proportion of tranches with realized or expected losses to 63 percent of the total...

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...