Tag Archives: RMBS

Driving home its rationale for new stimulus measures, the Federal Reserve on Wednesday reiterated the pains many Americans are living with every day - economic growth remains slow, unemployment remains elevated, and housing remains depressed. With these and other downside risks holding back recovery, the Federal Reserve says it will begin reinvesting its money into mortgage-backed securities issued by Fannie Mae and Freddie Mac, and it will purchase another $400 billion in Treasury bonds.

Fannie Mae and Freddie Mac will begin raising the fees they charge lenders for guarantees on mortgage loans next year. According to the companies' regulator, it's a step toward readying the market for private-sector reinforcements and weaning the nation's housing sector off of low-cost government support. FHFA's director says it ought to be clear at this point that the two mortgage giants will not be able to emerge from conservatorship. He argues that more progress should have been made on housing finance reform by now.

Total Mortgage Services, LLC, a Connecticut-based mortgage lender, has received approval from Fannie Mae to be a seller/servicer for one-to-four unit single-family first lien mortgages. The company explained that with the designation it can now retain mortgage servicing rights for GSE loans, as well as sell and pool loans into mortgage backed securities (MBS) and expand its product offerings.

The Senate Banking Committee held a hearing Tuesday on housing finance reform, the first of three housing-related hearings on the agenda this week. The issue of government guarantees for home mortgages came under some fire. One witness with the American Enterprise Institute in Washington, D.C. noted that without any change in policies and without any further increase in the GSEs' debt, the national debt will reach $30 trillion in 10 years.

Congressman Gary Ackerman of New York has sent a letter to House Appropriators urging them to extend the temporarily increased conforming loan limit that will otherwise expire October 1. Ackerman was joined by 36 members of Congress in his request. He suggested the conforming loan limit extension be built into the continuing resolution that will keep the federal government functioning when the new fiscal year begins next month. Private investors, though, are advocating for the loan limit increase to expire.

The American Securitization Forum (ASF) recently released the ASF Model RMBS Repurchase Principles, which were designed to align the incentives of originators with those of investors. The trade group's guidelines deal specifically with maintaining skin-in-the-game through the enforcement of representations and warranties. ASF says the risk retention rules proposed by regulators, on the other hand, are not sufficiently tailored to various asset classes and will likely have negative consequences.

At a congressional hearing Wednesday, witnesses voiced concerns about the government's participation in the mortgage market as well as the lack of transparency between servicers and investors. One analyst described the U.S. housing finance system, where the GSEs account for over 90 percent of new mortgages, as ""problematic."" Others said government is crowding out the private market with programs that make below-market-rate loans available to nearly all borrowers, and they advocated for the expiration of increased conforming loan limits.

The Federal Housing Finance Agency's decision to pursue legal action against firms that sold residential mortgage-backed securities to Fannie Mae and Freddie Mac could potentially strain relationships between the GSEs and the companies named as defendants, many of whom still sell mortgages to Fannie and Freddie and service home loans held by the two mortgage financiers. Some of the financial firms have been forthcoming with pledges to aggressively defend themselves against the allegations and are disappointed by the fact that FHFA has taken to the courts.

The Federal Housing Finance Agency (FHFA) is suing 17 financial institutions in an attempt to recover losses incurred by Fannie Mae and Freddie Mac from mortgage bonds purchased between 2005 and 2007. Based on initial reports, FHFA is looking to recoup as much as $45 billion. At least one financial analyst believes the matter will end in a settlement significantly south of that amount. Others say a more long-lasting impact may come in the form of higher mortgage costs for consumers.

Sen. Al Franken of Minnesota continues to express concerns that the new rules regarding ratings agencies are not addressing fundamental issues with ratings procedures. Franken, along with other congressmen and policymakers, believes ratings agencies inflated assessments of mortgage-backed securities and that these inflated ratings ultimately led to the financial crisis. During a conference call hosted by Americans for Financial Reform, Franken and others spoke out on the inherent conflict of interest they see within ratings procedures.