Secondary Market

Housing got only a brief mention in President Obama's highly anticipated jobs speech Thursday night, but it was a pledge that some pundits say is a step in the right direction. Others say it's likely to have little impact. Obama told Congress his administration will work to refinance millions of homeowners' mortgages at today's record-low rates. It's expected the program will give borrowers who are underwater or have bad marks on their credit the opportunity to take out lower-rate, lower-payment loans.

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.

For the first time in over a year neither Fannie Mae nor Freddie Mac are showing any downward movement in their seriously delinquent mortgage rates. Fannie's percentage of single-family loans at least three payments past due remained unchanged between the months of June and July at 4.08 percent. Freddie's increased one basis point to 3.51 percent. The Federal Housing Finance Agency says foreclosure prevention actions completed on loans held by the two mortgage financiers have declined for four consecutive quarters.

As state attorneys general and major U.S. banks continue to work toward a settlement, questions abound regarding the amount of legal liability the mortgage servicers should and will maintain after an agreement is signed. Media reports have surfaced claiming a draft proposal put forth by the attorneys general includes language that could prevent officials from bringing securitization claims in the future, but the negotiating committee for the states is adamant that servicers will not be released from all civil liability or any criminal liability.

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.

Fannie Mae is bolstering the incentive fees paid to servicers modifying the GSE's loans through the Home Affordable Modification Program (HAMP). The new incentives apply to all HAMP mods with a trial period effective date of October 1, 2011 or later. In a servicing policy update, Fannie Mae explained that it will begin paying servicers based on a tiered incentive structure that coincides with the number of days the mortgage loan has been delinquent when the trial plan starts.

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.

After rising in July, CMBS delinquencies picked up their downward trend again in August, decreasing 36 basis points to 9.52 percent. This drop is the third in the past four months, according to analysis released by Trepp LLC, a provider of commercial real estate data. Serious delinquencies also declined for the month and now make up 8.79 percent of commercial mortgage loans. According to Trepp, August's decline was the largest recorded since 2008 when the credit crisis began.

StreetLinks Lender Solutions says the company can ensure compliance with phase one of the Uniform Mortgage Data Program (UMDP) for appraisals ordered through both its full-service AMC solution, LenderPlus, and self-managed appraisal software platform, LenderX. All appraisals on loans destined for Fannie Mae or Freddie Mac are now required to comply with new Uniform Appraisal Dataset (UAD) requirements. StreetLinks requires that appraisers provide their assessments in the UAD-compliant format.

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.