California continued to lead all states in FHA and VA mortgage securitization in the first three months of 2018. The Golden State accounted for 15.3 percent of the $50.6 billion of FHA loans delivered into Ginnie Mae mortgage-backed securities in the first quarter. FHA loans comprised 18.2 percent of loans securitized by Fannie Mae, Freddie Mac and Ginnie Mae, and 34.6 percent of agency-securitized loans with primary mortgage insurance. About 66.6 percent of FHA loans securitized during the period were for purchase mortgages while refinance loans accounted for 27.5 percent. The average loan-to-value ratio of FHA loans in Ginnie pools was 93.0 percent. The average credit score of 668.2 reflected FHA’s traditional base of lower-income and first-time homebuyers, with an average debt-to-income ratio of 42.4 percent. The other states among the top five in terms of FHA deliveries into Ginnie pools were ... [Chart]

Treasury Official Sees Major Impact from Single Security. A key Treasury Department official suggested that issuers of non-agency MBS may someday participate in the common securitization platform being developed by Fannie Mae and Freddie Mac. Craig Phillips, counselor to the Treasury, said the industry has made a lot of progress toward the launch of the single security that is scheduled for June 2019. “Industry preparedness is about an eight or nine on a scale of 10,” he said during remarks at this week's secondary market conference sponsored by the Mortgage Bankers Association in New York. Phillips characterized the...

The Federal Home Loan Banks will be able to use their own models and methodologies for internal assessments of mortgage asset credit risk next year, according to a bulletin issued by the Federal Housing Finance Agency late this week. The FHFA provided guidance on the models, which would apply to acquired member asset (AMA) mortgage pools, mortgage-backed securities, and collateralized mortgage obligations. “A bank should select a credit-risk model that is capable of producing loan-level estimates of potential credit loss, and that can accept as an input user-defined macroeconomic stress scenarios disaggregated to at least the state level,” said the FHFA.

The Federal Housing Finance Agency Office of Inspector General said the FHFA did not make sure that Freddie Mac’s plans to address cybersecurity deficiencies were sufficient. Instead, the agency questionably closed the matter requiring attention (MRA) after deciding on its own that the GSE had completed its planned remedial actions.This raised a red flag with the OIG, which said when an MRA is issued, the FHFA requires the GSE to provide a remedial plan that includes specific milestones that take into consideration the complexity of the issue and the urgency regarding the correction.

The Federal Housing Finance Agency is proposing to amend its regulations on the responsibility of the board, directors, corporate practices, and corporate governances for the GSEs and Federal Home Loan Banks. It also would apply the FHLB strategic business plans to Fannie and Freddie. This means that the GSEs’ boards would have a strategic business plan in effect at all times, which describes how the regulated entity will achieve its statutory purposes. Moreover, there’d be a provision that requires each GSE board to review the strategic plans annually, re-adopt it once every three years, at minimum, and...

Ginnie Mae’s anti-churning efforts have narrowed the spread between Ginnie and Fannie Mae mortgage-backed securities, prompting executives to say things are almost back to normal. In an interview with Inside FHA/VA Lending this week, Michael Bright, executive vice president and chief operating officer at Ginnie Mae, said the market and investors have responded positively to the agency’s efforts to resolve the churning and prepayment problems. “The Ginnie spread has fallen almost half a point and our securities have become more liquid,” he said. “We want to make sure we’re giving investors CPRs (constant prepayment rates) that they can model.” Bright said he cares less about the overall level of prepayment speeds. What he truly cares about is ensuring that when an investor purchases a Ginnie security, the prepay speed is correlated to changes in the interest rates and not the ...

Ginnie Mae has passed the $1 billion mark for mortgage-backed securities issued through the Federal Home Loan Banks’ Mortgage Partnership Finance program. The MPF government MBS product was available initially to eligible participating members of the Federal Home Loan Bank of Chicago. The Chicago FHLB launched the MPF program in 1997 to give approved participating members access to the secondary mortgage market. Specifically, the program provided an outlet other than Fannie Mae and Freddie Mac for member institutions to sell fixed-rate mortgage loans (conventional, government, or jumbo). Most of the institutions participating in the MPF are small banks, thrifts and credit unions with assets of less than $400 million. The MPF government MBS product arose from a 2015 partnership between Ginnie Mae and the Chicago FHLB to issue Ginnie MBS backed by ...

The Federal Home Loan Banks would have more flexibility in allocating their affordable housing funds under a proposed rule issued last week from the Federal Housing Finance Agency. The FHFA estimates that the number of competitive AH program competitive applications the banks receive may increase by 10 percent with this change. In addition to giving the FHLBanks additional authority over their funds, the rule would authorize them to set up special competitive funds targeting affordable housing needs in their districts. It would also give the banks authority to design and implement their own project selection scoring criteria, subject to meeting certain FHFA requirements.

Banks and thrifts reported holding $582.5 billion of Federal Home Loan Bank advances at the end of December, a quarterly increase of 1.2 percent and the largest volume of advances in the past 12 months, according to an Inside The GSEs analysis. On a year-over-year basis, that number is also up 3.4 percent from the $563.3 billion in advances held in the fourth quarter of 2016. While JPMorgan Chase remains in the number one spot with $60.6 billion in advances, the bank’s borrowing continued to spiral downward from the previous quarters. Fourth quarter numbers show a 4.9 percent decline for Chase from the third quarter and a 23.8 percent drop from the year before.

Ginnie Mae is considering a risk-sharing pilot that would have private capital absorb some of the potential losses on FHA loans securitized through the agency. In remarks at the Structured Finance Industry Group conference in Las Vegas recently, Michael Bright, executive vice president and chief operating officer with Ginnie, said no decision has been made on any credit-enhancement structure, as consultations with stakeholders are still ongoing. “We are actively looking at structures we can put in place where we bring in private capital to provide a [partial] guarantee,” explained Bright, Ginnie’s acting president. “The FHA is going be involved in a lot of them.” A risk-share partnership between FHA and private credit enhancers not only would protect the Mutual Mortgage Insurance Fund but reduce taxpayer risk as well, observers said. The risk-sharing concept would have private mortgage insurers assuming ...