Treasury: Credit Constraint Is Not Reform's Focus

Secondary and primary market representatives at an industry conference Wednesday morning said their concerns about governmental changes like GSE reform and Dodd-Frank largely center on their potential to tighten mortgage credit availability and exacerbate a still-struggling housing market.

“The focus…is not to constrain credit,” Jeff Foster, the Treasury’s senior policy advisor-capital markets, told attendees at the Mortgage Bankers Association’s secondary market conference.

Foster said the government wants to hear industry concerns as it proceeds at a deliberate pace on big moves like GSE reform.

Tom Deutsch, executive director of the American Securitization Forum, told this publication it might be best for there not to be a rush to reform because of the pressure it could put on mortgage rates and housing. Removing the effective subsidy the agencies’ guarantee fees put on rates and adding to secondary market costs by, for example, adding loan-level transparency, means rates will inevitably rise as reform occurs, he said. This could cause housing demand to continue to decline.

“Mortgage rates will go up. There is no doubt in my mind,” Deutsche said during a panel discussion at the conference.

Government controlled mortgage giant Freddie Mac posted its first true net profit in almost two years, earning $676 million in the first quarter — even after paying the U.S. Treasury a $1.6 billion dividend on the preferred stock it owns.

The city of Los Angeles filed a civil lawsuit Wednesday against Deutsche Bank, claiming the German bank failed to maintain foreclosed properties and illegally evicted hundreds of low-income renters.

A House Financial Services subcommittee Wednesday approved a bill that creates a five-member commission to steer the new Consumer Financial Protection Bureau instead of a single director.

Thanks to lower interest rates, mortgage applications increased 4% on a seasonally adjusted basis for the week ending April 29, according to new figures released by the Mortgage Bankers Association.

Genworth Financial earned $82 million in the first quarter, a 54% drop from the year ago, as continued losses at its mortgage insurance unit held back the company’s financial recovery.

Some mortgage vulture funds may be heading for the exits, but not the publicly traded PennyMac Mortgage Investment Trust, the brainchild of former Countrywide Financial Corp. president Stanford Kurland.

The House Capital Markets and GSE subcommittee late Tuesday advanced a bill to create a U.S. covered bond market but major issues need to be worked out first before the measure is ready for a full committee markup.

PHH Corp., Mt. Laurel, N.J., earned $49 million in the first quarter, up from $8 million in the same period last year, driven in part by a 77% increase in mortgage closings and a $68 million pre-tax gain on the sale of 50.1% of its appraisal business to CoreLogic.

Moody's Investors Service late Tuesday downgraded Bank of America’s residential servicing ratings, citing continuing challenges the nation’s largest servicer faces with its 2008 purchase of Countrywide Financial Corp.

Investigators keep finding skeletons in the closets of companies that participated in the mortgage boom. In a case the government filed against Deutsche Bank AG on Tuesday, the “closet” part is literally true.

After three consecutive months where the national commercial mortgage-backed securities delinquency rate was leveling off, the latest report from Trepp signaled the recovery is nowhere in sight.

Residential Finance Corp., Columbus, Ohio, has hired Daniel Jacobs, former 1st Metropolitan CEO, to head up its new retail branching operation, ProLending Network.

Frank Keating, the head of the American Bankers Association, late Tuesday reneged on his endorsement of Elizabeth Warren as director for the Consumer Financial Protection Bureau within hours of saying the trade group would "be fully supportive" of her nomination.

CRIF, the Italian financial services provider, this week continued its buying spree of credit union lending software companies with the acquisition of Cypress Software Systems.