Secondary Market

The FDIC approved a formal proposal Tuesday that would impose stricter rules on banks that package loans as mortgage-backed securities (MBS). In order for the bundled mortgages to be protected from seizure in the event the FDIC steps in to shut down the institution, lenders would be required to retain at least 5 percent of the securities on their own books. Some critics say the rule creates an uneven playing field since applies only to banks and not to other financial firms.

KDX Ventures, a joint venture between Boston-based DebtX and Hillsborough, North Carolina-based KEMA Advisors, announced Wednesday that it successfully auctioned a HUD portfolio containing $306 million in non-performing multifamily and healthcare loans. The portfolio consisted of 25 multifamily commercial real estate loans and one healthcare loan, ranging in size from $1.6 million to $44.3 million.

In a 56 to 43 vote, Democratic senators have defeated an amendment to the financial reform package that would have set a finite end date for taxpayers' support of the GSEs and laid out a 15-year plan for the companies' ultimate dissolution. Some critics have called the GSEs' bailout ""the biggest financial scandal in the United States."" But at the same time, many find it hard to deny that it's Fannie and Freddie's support that's keeping the wheels of the nation's battered housing market turning.

Global Financial Review, Inc. has been approved by Standard & Poor's Ratings Services as a third-party due diligence provider for U.S. residential mortgage-backed securities (RMBS). The company says its expertise in the review of non-performing mortgage loan pools contributed greatly to its continued success during this historic downturn of the residential mortgage market.

Underperforming properties in states with weak economies led to another increase in U.S. commercial mortgage-backed securities (CMBS) delinquencies in April. Both Fitch and Moody's put the CMBS delinquency rate above 7 percent, but interestingly enough, they have different takes on the pace of the increase. Fitch says April's climb represents a slowdown thanks to special servicers stepping up loan resolutions. Moody's says the April increase in the second biggest jump it has ever recorded.

Clayton Holdings, which provides risk analysis and loss mitigation to the mortgage industry, announced Tuesday that it has incorporated Fannie Mae's newly announced quality control standards into its underwriting offerings. The GSE's new Loan Quality Initiative specifies the policies and process and technology enhancements that it will require from sellers in order to mitigate loan repurchase risk. Clayton says it can help lenders meet these new requirements through its outsourcing and consulting businesses.

Mortgage giant Fannie Mae has reported a net loss of $11.5 billion for the first quarter of 2010. The deficit has prompted the GSE to ask the Treasury for another $8.4 billion in federal funding. Fannie Mae's single-family serious delinquency rate increased to 5.47 percent as of March 31, 2010, up from 5.38 percent as of the end of last year. However, on a month-to-month basis, March's delinquencies were down from 5.59 percent in February. The GSE acquired 61,929 single-family properties through foreclosure during the first three months of this year.

According to a recent report by DebtX, a full-service loan sale advisor based in Boston, the aggregate value of DebtX-priced commercial real estate (CRE) loans that collateralized commercial mortgage-backed securities (CMBS) dropped to 75.9 percent as of March 31, 2010, inching down from 76.5 percent as of February 26, 2010 and 81.2 percent as of March 31, 2009.

Delinquency rates for some residential mortgage-backed securities (RMBS) are beginning to improve. According to the latest performance metrics results from New York-based Fitch Ratings, April marked the first month in four years that serious delinquencies for U.S. Alt-A RMBS have declined. In addition, subprime late-pays fell for the second straight month, while prime RMBS delinquencies increased just slightly.

Experian announced Monday the launch of CreditHorizons for Securities, a data-feed product that the company says provides the missing link to understanding the true creditworthiness of the underlying borrowers in secondary market mortgage deals. CreditHorizons for Securities consists of anonymized U.S. consumer credit profiles that have been matched to the private-label mortgage-backed securities (MBS) deals in a loan-level database provided by First American CoreLogic.