Tag Archives: Mortgage-Backed Securities

With the euro zone crisis deepening, members of the Federal Open Market Committee elected to stay the course in November by keeping interest rates historically low and pooling investments from agency debt into agency mortgage-backed securities. Minutes framed discussions around concerns about weakening confidence in the markets as a result of any potential default by euro zone nations, even while the U.S. economy signaled that it would continue climbing out of the financial crisis. Europe helped rattle markets and compel the Fed's action in 2011.

Acknowledging improvements in the larger economy, the Federal Open Market Committee said Tuesday that it would keep a heel on zero interest rates and continue shepherding funds from mortgage-backed securities into agency mortgage-backed securities. The rate for federal funds remains between zero interest and .25 percent since December, and follows an earlier decision by the Fed to buy up $400 billion in Treasuries to ensure lower borrowing costs.

A failure by lawmakers to slash $1.2 trillion from the national debt spurred Fitch Ratings to place U.S. debt on negative outlook Monday, a move that immediately hit GSEs Fannie Mae and Freddie Mac by association. The ratings agency revised a stable outlook for debt held by Fannie and Freddie to negative, even while it reaffirmed AAA-ratings in place for the GSEs. Multiple news reports suggest that Fitch will likely downgrade credit ratings for the U.S. federal government, along with Fannie and Freddie.

A U.S. district court judge threw out a settlement Monday that Citigroup proposed as a way to compensate investors for losses related to $1 billion in collateralized mortgage debt. Citigroup wanted to settle with the Securities and Exchange Commission by covering the losses with $285 million. He cited the need for more information in lieu of a request for enforcement of relief by the court from the commission, a federal agency, and Citigroup, a private party.

Fielding more pressure for housing finance reform, Sen. Bob Corker (R-Tennessee) introduced a bill Wednesday that aims to decouple government assistance from the GSEs and shore up private-sector involvement in mortgage markets. The bill, titled the Residential Mortgage Market and Privatization Act, proposes gradually reducing the percentage of principal in the GSEs├â┬ó├óÔÇÜ┬¼├óÔÇ×┬ó mortgage-backed securities, streamlining underwriting standards and origination databases, and removing federal guarantees to create a much-discussed to-be-announced market.

If a new Senate bill becomes law, it could finally create a long-awaited covered bond market for the nation, effectively making mortgages easier to securitize and increasing their appeal for investors. Earlier Wednesday a bipartisan group of senators, led by Sens. Kay Hagan and Bob Corker, introduced the United States Covered Bond Act of 2011 in order to kick-start what some regard as necessary for a full-fledged housing recovery. European nations have long benefited from a covered bond market, with legal bodies in place for bonds.

Nonfarm payrolls counted more than 80,000 new jobs for the economy over October, slashing the unemployment rate by a few percentage points but at a clip that analysts say will marginally improve an otherwise uncertain economic outlook. The Labor Department reported Friday that the jump to more than 100,000 new jobs over September - a facelift driven largely by a return to work by striking Verizon employees - slid back to new figures with few surprising numbers for several industries.

The head of the agency that regulates the GSEs addressed one lawmaker's recent proposal to eliminate the federal lifeline for Fannie Mae and Freddie Mac Thursday even as the latter filed staggering third-quarter losses and requested another $6 billion in taxpayer funds. Federal Housing Finance Agency Acting Director Edward DeMarco and several others testified before the House Subcommittee on Capital Markets, which heard the chief regulator describe why the federal government needs to slowly phase out taxpayer support for the GSEs.

The Federal Reserve restrained itself from announcing any new monetary or fiscal stimulus measures, deciding instead that it will continue to reinvest principal payments for agency debt in mortgage-backed securities while it keeps a heel on historically low interest rates. Continuing a public relations tour at a time of increasing unpopularity on both the right and left, Federal Reserve Chairman Ben Bernanke addressed reporters from behind a desk.

Modifications in line for the Home Affordable Refinance Program from the Obama administration will buoy homeowners with negative equity and origination markets, but field few other benefits for investors in mortgage-backed securities, according to a new outlook. Analytics provider CoreLogic released a statement Monday demarcating HARP├â┬ó├óÔÇÜ┬¼├óÔÇ×┬ós benefits and problem areas, skewering assertions that the program will alleviate a chronic lack of demand and showing that economic troubles may persist despite government assistance.