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Tag Archives: MBS

Study: Securitization Elicits Risky Lending Practices

The act of securitizing mortgage loans can lead to riskier lending, and ultimately more defaults, according to a study posted by the Federal Reserve Bank of New York. About 60 percent of outstanding mortgage debt in the United States is traded in the mortgage-backed securities (MBS) market, ""making the U.S. secondary mortgage market the largest fixed-income market in the world,"" according to Fed researchers. While admitting the MBS market ""is an important innovation and has several merits,"" the study finds a darker side to the market.

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FHFA, GE Reach Settlement Over Securities Sold to Freddie Mac

The Federal Housing Finance Agency (FHFA) and General Electric (GE) have reached a settlement to resolve claims of misrepresented mortgage-backed securities (MBS) sold to Freddie Mac. The settlement brings to a close one of 18 legal actions filed by FHFA against various financial institutions in its capacity as conservator for Fannie Mae and Freddie Mac. FHFA's suit, filed in 2011, alleged GE misrepresented the quality of loans contained in $549 million of MBS sold to Freddie Mac.

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Fed Pays Record $88.9B to Treasury after Earning Interest Income

The Federal Reserve announced it paid a record $88.9 billion to Treasury in 2012. In 2011, the Fed distributed $75.4 billion to Treasury. The previous record amount was for $79.3 billion in 2010, according to the Fed. The earnings are from Fed programs that were introduced to stimulate the economy and involve the purchase of billions in mortgage-backed securities (MBS) each month to keep interest rates down. Currently, the Fed buys $40 billion in MBS each month and $45 billion in Treasury purchases.

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NCUA Sues JPMorgan for $3.6B in MBS Suit

The National Credit Union Administration (NCUA) announced Monday it has filed suit against JPMorgan Securities and Bear Stearns over allegations of falsely representing the quality of mortgage-backed securities (MBS) sold to corporate credit unions. At $3.6 billion, the legal action is the largest suit ever filed by the NCUA. According to the agency, Bear Stearns (purchased in 2008 by JP Morgan) misrepresented the underwriting standards of loans in securities sold to U.S. Central, Western Corporate, Southwest Corporate, and Members United Corporate. The four credit unions became insolvent and were placed into NCUA conservatorship and liquidated.

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FOMC Ties Fed Funds Rate to Unemployment

Despite recent improvements in the unemployment rate and housing, the Federal Open Market Committee (FOMC) Wednesday voted to continue its program of purchasing $40 million a month of mortgage backed securities and to maintain the target Fed Funds rate at 0 to 0.25 percent. The FOMC vote was 11-1 with only Richmond Fed President Jeffery M. Lacker dissenting.

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DeMarco Addresses Future of ‘Broken’ Secondary Market in Speech

In prepared remarks delivered before SIFMA members Thursday, Federal Finance Housing Agency (FHFA) Acting Director Edward DeMarco addressed the current state of the secondary mortgage market and the agency’s steps toward building a better market for the future. Part of the process of improving the market is by bringing the ""conservatorships to a conclusion,"" while strengthening the private sector's role in housing finance, DeMarco contended. As it now stands, DeMarco said, ""The secondary mortgage market infrastructure that served this country for many years is broken.""

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Freddie Mac: Fixed Rates Break Record Lows Again

The average 30-year fixed-rate mortgage rate fell to 3.31 percent (0.7 point) over the week ending November 21. The previous week, the rate was 3.34 percent, and last year, the rate stood at an even higher 3.98 percent, according to Freddie Mac. The 15-year fixed-rate mortgage also experienced a decline this week, falling from 2.65 percent to 2.63 percent (0.7 point), according to Freddie Mac's data. This week last year, the rate was 3.3 percent.

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Fannie Mae Releases Forecast on Housing, Economy

Given improvements seen in housing, Fannie Mae revised its housing forecast higher for 2012 and 2013 in its November economic outlook report. The GSE's Economic & Strategic Research Group anticipates single-family housing starts will jump 25 percent this year, then rise by another 22 percent in 2013. Existing-home sales should also rise and see a 9 percent increase in 2012 and a 4 percent gain in 2013. Even though reports on the housing sector give reasons to be optimistic, Fannie Mae still warned ""data continue to show a sluggish recovery overall.""

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Lingering Headwinds Make Recovery ‘Disappointingly Slow’

While various economic reports hint at improvements in the nation's economy since the economic crisis was in full swing, improvement is meek and recovery seems too strong a word to describe the progress thus far. Federal Reserve Chairman Ben Bernanke calls the pace of recovery ""disappointingly slow."" In a speech before the New York Economic Club Tuesday, Bernanke pointed out some of the lingering headwinds preventing the economy from more momentous progress.

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