Commercial banks added nearly $30 billion of mortgage-backed securities to their portfolios dur-ing the second quarter, but the industry’s stake isn’t getting any bigger in the MBS market. Commercial banks held a record $969.77 billion of MBS in their portfolios as of the end of June. That represented a tidy 3.2 percent gain from the previous quarter, and it was up a solid 8.1 percent from the same point in 2005. But commercial bank holdings of mortgage securities accounted for an estimated 17.6 percent of total... [Includes three charts.]
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Sen. Richard Shelby, R-AL, this week tried to resuscitate legislation to toughen oversight of Fannie Mae and Freddie Mac by offering to cut a deal on what has been the key stumbling block: pro-posed limits on the retained investments of the government-sponsored enterprises. The chairman of the Senate Banking, Housing and Urban Affairs Committee said he would con-sider moving a GSE reform bill without strict portfolio limits as long as the risks posed by these mas-sive holdings are addressed somehow. Treasury Secretary Henry...
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A new study by Federal Reserve Board economists concludes that the large retained portfolios of Fannie Mae and Freddie Mac “have essentially no short- or long-term effects on either primary or sec-ondary market spreads.” The researchers – Andreas Lehnert, Wayne Passmore and Shane Sherlund – looked at monthly purchase activity by the government-sponsored enterprises and mortgage origination estimates by Inside Mortgage Finance, an affiliated newsletter. They reported finding evidence that GSE portfolios tend to rise when...
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Facing an increasingly challenging market on several fronts, including increased competition from Wall Street, Countrywide Financial plans to broaden its product menu and securitization activities with hopes of diversifying its revenues and expanding its customer base. Countrywide will soon offer new fixed income securities products, including derivatives and commercial MBS, the company announced this week. Additionally, the company hopes to generate more fee-based income and leverage its distribution network.
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TCW Group, a boutique securities investment firm, plans to raise $1.5 billion from institutions and wealthy individuals to buy distressed mortgage-backed securities. Profits are waiting for the harvest by jumping into the market when others are getting out, TCW told Bloomberg News. The firm’s $520-million TCW Total Return fund was the best performing among mortgage funds for the five years and 10 years ending in 2005, according to fund tracker Lipper Inc., beating out the Pimco Total Return fund, which is nearly 200 times...
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Wall Street’s foray into lending and servicing is bringing a new twist to the mortgage business, but it’s unclear how the merging of primary and secondary market activities will shape investment bankers’ political and regulatory agenda. The recent spate of acquisitions by Wall Street investment banks means firms that have traditionally focused on secondary market issues now have to pay closer attention to state and federal efforts to regulate loan originators. In particular, some observers have questioned whether...
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Issuers of subprime mortgage securities continue to sweeten the deal for investors by providing swaps, caps and other derivatives to reduce interest-rate risk on these bonds, according to the Inside Mortgage Finance MBS Database. A total of $342.70 billion of non-agency MBS issued during the first half of 2006 carried some form of derivative support, representing about 58.3 percent of total issuance. Derivatives were, by far, most prevalent on subprime securities, with 92.3 percent of these bonds... [Includes one chart.]
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Fannie Mae and Freddie Mac appear to be on schedule to complete their respective financial reporting initiatives, ready to weather a housing slowdown, and hopeful of becoming more agile in an increasingly competitive market. That was the message that both Freddie Chairman and CEO Dick Syron and Fannie’s new CFO Robert Blakely provided in separate presentations to investors and industry representatives at a Lehman Brothers Financial Services Conference this week. Both executives acknowledged some rough spots in the...
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