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19 Feb 14 Companies Returning to Mortgage Servicing in the US

The private mortgage sector is making a come back. After a 5-year hiatus, many mortgage companies are taking some risks with servicing residential mortgage liens. The game is different and the rules have changed but the servicing sector seems to have new life again.

The former senior adviser at the Consumer Financial Protection Bureau, Chris Haspel helped develop new mortgage rules aimed at preventing a rerun of the non-prime boom. Now, he is part of a growing industry seeking to profit from making loans that fall outside the new “qualified mortgage” regulation he helped author.

Many of the largest lending companies in the United States have said they do not intend to originate or securitize high numbers of non-qualified-mortgages, raising fears that home financing credit could soon dry up for millions of Americans. At the same time, a crop of new non-bank lenders are stepping in to fill what they see as a gap left by retreating banks

The new QM standard is expected to be followed next month by the “qualified residential mortgage” rule which aims to better align the incentives of those who slice-and-dice loans into mortgage bonds with the interests of the investors who buy the securities. The rule is expected to follow broadly the same criteria set out by the QM rules and will probably exempt the financial entities that create, or “sponsor,” securitisations of QM loans from having to hold on to a slice of the deal. That means securitizers of non-qualified mortgages will probably have to hold a piece of the resulting bond. For banks, already beset by new capital rules, that is an onerous requirement and one that is likely to deter them from bundling non-QM loans.

Props to the Financial Times 

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25 May 10 No 2nd Mortgage Modifications for Obama Loan Relief Efforts

According to the Huffington Post, 11 million homeowners owe more on their home loan than their house is worth, putting them “underwater.”  Obama’s 2nd mortgage modification program has failed miserably because after one year and millions of 2nd loan candidates they have not modified even one second mortgage loan. This mortgage relief plan was supposed to reward mortgage servicers to coordinate principal reductions on second mortgage loans when the first mortgage is modified under the administration’s Home Affordable Modification Program.

In today’s upside-down market, homeowners who are stuck with under-water mortgages are seeking principal reductions.  Many second mortgage lenders are actually lowering the principal for these borrowers because in many cases it is a better option than taking over the property from a foreclosure or surrender.  Loan modification that simply lower the interest rate are often not enough for homeowners residing in these heavily depreciated regions like Southern California, Las Vegas and Phoenix, Arizona.  According to Citi’s regulatory filings, about 28% of its first mortgages are now worth more than the underlying assets, along with about 42% of their second mortgages.

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08 Jan 10 Jumbo Loan Market Remains Sluggish

In other mortgage news, jumbo mortgage loan market continues to get hit hard.  Jumbo lenders offering jumbo loan products want significant down-payments even if the home loan applicants are earning large salaries. It would stand to reason that if any private label market returns it would be the jumbo sector where presumably the applicants would be in strong shape financially. However, they see nothing on the horizon whatsoever in regard to jumbo loan securitizations returning any time soon…Read more from National Mortgage News

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10 Sep 09 Bonds for Mortgage Loans Yields Decline

Bloomberg reported that yields on Fannie Mae and Freddie Mac mortgage securities declined to the lowest in more than three months, signaling that mortgage rates on home loans will drop more and bolster the U.S. housing market.   Yields on Washington-based Fannie Mae’s current-coupon 30- year fixed-rate mortgage bonds fell 0.1of a percentage point to 4.29% as of 3 p.m. in New York, the lowest since May 26, according to data compiled by Bloomberg. The drop followed benchmark Treasury yields lower after stronger-than-forecast demand at the last of three government debt auctions this week.   “If Treasury auctions are oversubscribed day after day, it is only natural that mortgages shouldn’t be far behind,” Tae Park, a portfolio manager in New York who oversees mortgage-bond investments at Societe Generale, said.

Lower mortgage rates may help the housing market offset a forecasted further flood of foreclosure sales to build on recent signs of strength, including the first month-over-month increases in property prices since 2006 registered in an S&P/Case-Shiller index in May and June.   The drop in mortgage-bond yields also suggests home-loan rates may reach the levels below 5% that analysts including Credit Suisse Group AG’s Mahesh Swaminathan say are needed to send refinancing to elevated levels, bolstering consumer finances and spending.   The average rate on a typical thirty-year fixed-rate mortgage dropped to 5.07 % in the latest week, McLean, Virginia based Freddie Mac said today in a statement. That’s down from as high as 5.59% in June, and up from the record low of 4.78% in April. While mortgage refinance applications rose to the highest since late May in the latest week, they remained 64% below the high this year set in January, according to a Mortgage Bankers Association index.

Yields on so-called agency mortgage bonds, the type of debt being bought by the Federal Reserve under a $1.25 trillion program as well as by the Treasury Department, are now guiding rates on almost all new U.S. home lending, following the collapse of the non-agency market in 2007 and retreats by banks. The almost $5 trillion market includes securities guaranteed by government- controlled Fannie Mae and Freddie Mac and bonds of U.S.-insured, low-down-payment loans backed by federal agency Ginnie Mae.   While “after four years of decline, the housing market is showing signs of turning,” sizable challenges remain, including more than 2 million foreclosures over the year ahead, Deutsche Bank AG analysts Peter Hooper and Torsten Slok in New York wrote in a report yesterday.  “The question is how strong the bounce,” they said. “Recent movements in sales, prices and builder expectations looked quite promising, but there are good reasons to expect that home building and prices will remain relatively depressed well into next year despite the recent bounce.”  Article was written by Jody Shenn.

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01 Sep 09 Freddie Mac Compliant for NYSE Listing

Mortgage rates are low and the home financing industry looks like it’s getting back on track.  Is Freddie Mac poised to gain their NYSE listing back on the stock market?  Mortgage giant, Freddie Mac soon may be receiving a notice from the New York Stock Exchange, saying it is back in compliance with the NYSE’s listing requirements. As of yesterday, Freddie Mac’s common stock was trading at $2.22, which means that its average share price will have been north of $1 for the past 30 days – that is, as long as its stock price doesn’t collapse by close of business Monday. Under NYSE rules, the exchange can initiate delisting proceedings for companies whose 30-day average price falls below $1. “We’re waiting for official notification from the NYSE,” a company spokeswoman said Monday. In a week it will mark the one-year anniversary since Freddie Mac and its sister company, Fannie Mae, were taken over the government and placed into conservatorship. The share price of both GSEs has been rising over the past month. Some stock analysts attribute the price increase to bottom fishing and speculation by short sellers. Freddie’s 52-week low is 25 cents, its high $5.52. In the second quarter Freddie actually posted a profit while Fannie lost money. 

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