Secondary Market

Two months after the implementation date of the qualified mortgage (QM) and ability-to-repay rules, Fitch Ratings announced it has finalized new criteria for analyzing loans in securities taking the new guidelines into account. Fitch developed assumptions with respect to the probability of challenges to the rule or a mortgage’s QM status, as well as the potential costs or damages.

Citing the “cumulative progress toward maximum employment and the improvement in the outlook for labor market conditions” since the start of the current stimulus program in 2012, the Federal Open Market Committee decided at its March meeting to reduce purchases of agency mortgage-backed securities to a pace of $25 billion per month and to dial back purchases of long-term Treasury securities to a pace of $30 billion each month, starting in April.

In recent months, institutional investors seem to prefer buying non-performing loans instead of more solvent ones, according to David LeBlanc, managing director of capital markets at DebtX. LeBlanc said that this action is thought to be caused by the decreasing margins available in real estate acquisitions. These types of loan sales are expected to increase as a result of new regulations that are forcing depository institutions to shed their bad loans to avoid increased holding costs and reserves.

The leaders of the Senate Banking Committee announced Tuesday plans to move forward on a new proposal to wind down Fannie Mae and Freddie Mac in favor of a new government backstop for private financiers. According to committee chairman Tim Johnson (D-South Dakota) and ranking member Mike Crapo (R-Idaho), the newly unveiled reform proposal is the result of months of exploratory hearings and negotiations.

Citing weak Q1 MBS issuance data, researchers for investment bank FBR Capital Markets anticipate a weak first quarter, with issuances likely totaling near $200 billion. While noting that issuances are not the same as origination figures, FBR nevertheless dialed back its first-quarter origination projections to $244 billion, bringing its full-year forecast to $1.2 trillion from $1.3 trillion previously.

Amid calls from the Obama administration for a more stable housing market—particularly where affordable housing is concerned—Michael Stegman, counselor to the Secretary of the Treasury for Housing Finance Policy, Thursday called for top-down reforms that would rewire how the federal government funds and regulates both government and private-label securities. He also criticized a pair of "implausible scenarios" that would either leave the GSE system to amend itself or rely on minor revisions.

Freddie Mac released Thursday the results of its Primary Mortgage Market Survey for the week ending March 6, showing the 30-year fixed-rate mortgage (FRM) falling 9 basis points to an average rate of 4.28 percent (0.7 point). Bankrate.com’s national survey showed slightly less dramatic movements, but rates were down all the same.

In identical letters addressed to the boards of each enterprise, Bruce Berkowitz, managing member and chief investment officer of Fairholme Capital Management, urges the directors at Fannie Mae and Freddie Mac to “act in the best interests of each company and in accordance with accepted best practices for corporate governance.”

The new year didn’t bring any new trends in Fannie Mae’s Book of Business, which shrank at an annualized rate of 3.5 percent in January. While business was down, delinquency rates, too, kept declining. According to the GSE, the single-family serious delinquency rate dropped 5 basis points to 2.33 percent in January, while the multifamily serious delinquency rate was flat at 0.10 percent.

The Federal Housing Finance Agency (FHFA) announced the appointment of Egbert L. J. Perry as chair of Fannie Mae’s board of directors. Perry will replace the outgoing Philip A. Laskawy, who will step down at the end of March.