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Tag Archives: RMBS

Obama’s New RMBS Investigation Unit Takes Shape

The special mortgage investigation unit announced by President Obama during his State of the Union address Tuesday night has taken shape. The new Residential Mortgage-Backed Securities (RMBS) Working Group will operate within the Financial Fraud Enforcement Task Force and will consists of at least 55 Department of Justice attorneys and investigators, as well as state attorneys general. The president has tasked the group with uncovering those responsible for pooling and selling mortgage bonds that contributed to the financial crisis.

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Homes Backing GSE Mortgages Post 1% Price Gain in November

Data released this week by the Federal Housing Finance Agency (FHFA) show purchase prices of homes backing mortgages that have been sold to or guaranteed by Fannie Mae and Freddie Mac rose 1.0 percent between October and November. The agency's index has recorded sporadic ups and downs throughout the year. For the 12 months ending in November, the net effect is a decline in property values of 1.8 percent. FHFA says prices are now roughly the same as in February 2004.

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Illinois AG Sues S&P

Illinois Attorney General Lisa Madigan filed a lawsuit against Standard & Poor's this week alleging the ratings agency inflated ratings of mortgage-backed securities investments - an act Madigan believes triggered the financial crisis. The suit, filed in Cook County Circuit Court, relies on internal emails from within the ratings agency as evidence of the company's misrepresentations of risk. Madigan references congressional testimony from a former managing director at S&P, stating ""profits were running the show.""

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Loan Modifications Are on the Decline: Moody’s

As robo-signing reviews reach completion, servicers are beginning to work through some of their foreclosure backlogs, according to a third-quarter report from Moody's Investors Service. At the same time, the ratings agency found that loan modifications are on the decline. Servicers are now turning to loss mitigation alternatives such as short sales and deeds in lieu, Moody's says. The agency is also forecasting longer timelines this year to move properties from foreclosure sale to REO liquidation.

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Investors Can Trim Losses by Discriminating Between Servicers: Report

The ratings agency Standard & Poor's says investors can cut their losses by basing servicer selection on key performance metrics of default management. The company has come up with a new method to assess residential mortgage servicer performance that looks at how the speed of the servicers' foreclosure processes and the success of their loan modification programs affect investors' losses on nonperforming loans, and S&P says it's found ""significant differences"" among 10 of the largest servicers.

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Biggest Risk for RMBS Investors? Strategic Defaults.

The performance of private-label residential mortgage-backed securities (RMBS) continues to face many challenges in 2012, with the biggest risk posed by strategic defaults, according to Moody's. The ratings agency says the performance of loan pools backing outstanding RMBS has begun to stabilize, with delinquency levels flat or even dropping as a result of modifications and re-default rates declining. It's the threat of strategic default, particularly in the prime jumbo sector, that has Moody's analysts worried.

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New Law Requires GSEs Increase Guarantee Fees

The two-month extension of the Temporary Payroll Tax Cut, signed by President Obama December 23, holds immediate implications for the GSEs. The law requires the Federal Housing Finance Agency (FHFA) to increase Fannie Mae's and Freddie Mac's guarantee fees by at least 10 basis points over the 2011 average for all single-family mortgage-backed securities. FHFA says the increase will be remitted to the U.S. Treasury, rather than retained as reserves by the two mortgage financiers.

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GSEs Held $2 Trillion in Subprime Loans at Height of Financial Crisis

At the height of the financial crisis in 2008, Fannie Mae and Freddie Mac held $2 trillion in high-risk subprime loans, amounting to 42 percent of their single-family portfolios, according to Edward Pinto of the American Enterprise Institute. Pinto, who served as chief credit officer for Fannie Mae until the late 1980s, arrived at this number by relying on data from the Securities and Exchange Commission (SEC), which filed a lawsuit against six former GSE executives for fraud.

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Investors Want Repurchase Assessment of $95B in JPMorgan Securities

JPMorgan Chase may soon be hit with a barrage of mortgage repurchase demands from investors, largely stemming from the lender's acquisitions of Washington Mutual and Bear Stearns. The Texas-based law firm of Gibbs & Bruns LLP says its investor clients have instructed the trustees of $95 billion in residential mortgage-backed securities (RMBS) issued by JPMorgan to open investigations in order to determine if the mortgage bonds are secured by ineligible loans.

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SEC Charges Former GSE Execs with Securities Fraud

Six former executives at Fannie Mae and Freddie Mac are now facing securities fraud charges for making misleading statements about the companies' holdings of subprime loans between March 2007 and August 2008. The Securities and Exchange Commission (SEC) alleges they fed the markets false information about the amount of risk on each company's books. Both GSEs entered into non-prosecution agreements with the SEC and have agreed to cooperate in the litigation against their former executives.

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