Secondary Market

The Structured Finance Industry Group (SFIG) has released the first of a series of papers aimed at restoring investor confidence in the private-label residential mortgage-backed securities market. Overall, the group's effort looks to clarify differences in alternative standards in order to improve transparency across RMBS deals.

While policymakers have made some headway in pushing through different GSE reform packages, a new report from Kroll Bond Rating Agency contends any reform legislation is unlikely to pass through Congress before the 2016 general election at the earliest.

In the first step of what is planned to be a multi-year effort, the Federal Housing Finance Agency (FHFA) has put out a request for industry input on the development of a common mortgage-backed security (MBS) designed to be issued and guaranteed by Fannie Mae or Freddie Mac.

The U.S. government is set to see another $5.6 billion from Fannie Mae and Freddie Mac as both GSEs continue to post solid earnings. Both companies released on Thursday their earnings reports for the second quarter, reporting subdued profits compared to recent quarters as settlement earnings and other previous one-time benefits subside.

Bank of America and the Justice Department are close to completing a long-rumored and record-setting deal to resolve allegations of misconduct sales of mortgage-backed securities that went bad, according to a report from the Wall Street Journal.

Based on data from Bloomberg, investment bank FBR Capital Markets estimates issuance of mortgage-backed securities (MBS) last month came to approximately $90 billion, marking a "significant improvement" from June and May. However, year-to-date originations are at approximately $633 billion, and with the historically stronger summer months done, FBR expects "the strong pace set in July could slow materially in August, September, and beyond."

Fannie Mae's book of business decreased at a compound annualized rate of 1.7 percent over the month of June, slower than the previous month's rate of 2.4 percent but continuing a streak of decreases that has persisted all year so far. Year-to-date, Fannie Mae's book of business has declined at a compound annualized rate of 2.2 percent.

A federal judge has ordered Bank of America to pay nearly $1.3 billion in penalties over a fraud case decided last year. The case revolved around a lending procedure referred to as the "High-Speed Swim Lane, "which prosecutors say was designed to churn out loans as quickly as possible with little regard for risk.

Leaders at the Federal Reserve voted Wednesday to move forward with the central bank's plans to gradually cut monthly bond purchases, a sign of growing confidence that the economy is trending in a more favorable direction. In a statement released following its July meeting, the Federal Open Market Committee announced it has voted to bring its purchases of agency MBS and longer-term Treasury securities to a pace of $25 billion per month.

Freddie Mac's mortgage portfolio shrank in June at its slowest pace so far this year as new business hit a six-month high. The mortgage giant reported in its June volume summary that its total portfolio declined at an annualized rate of 0.1 percent, down from May's contraction rate of 2.1 percent and bringing the monthly growth average to -2.0 percent.