Capstead Mortgage Corp., an MBS-investing REIT, saw its second quarter earnings fall 59% in the second quarter to $29.8 million, citing "sharply higher portfolio runoff" caused by Fannie Mae and Freddie Mac buyouts.
"The GSE buyout programs have created a period of sharply higher portfolio runoff, which has contributed to higher premium amortization and lower portfolio yields," said company CEO Andrew F. Jacobs.
Jacobs noted that the GSEs have "largely concluded" their buyout programs with June purchases to be reflected in the July portfolio runoff numbers.
Fannie and Freddie have been purchasing delinquent mortgages out of MBS pools, which allows them to save money by not passing on revenue to the end investor. While this saves Fannie and Freddie millions of dollars in MBS payouts, it reduces the yield on the underlying security and hurts cash flow to investors such as Capstead.
The publicly traded Capstead is a large buyer of mortgage bonds backed by ARMs. The company saw the yield on its interest earning assets fall to 2.47% in the second quarter, down from 2.99% in the first, a decline of 52 basis points.
The company purchased $926 million of MBS during the quarter, more than offsetting $857 million of principal runoff. Its portfolio grew to $7.7 billion at June 30, a slight increase from March 31.
Daily Briefing | Wednesday, September 8, 2010
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MBA Asks FHFA for Assurances on GSE Servicing Rights
The Mortgage Bankers Association is asking the Federal Housing Finance Agency to assure lenders that their servicing contracts with the GSEs will not be repudiated in the event of their liquidation by the government.
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Mortgage Applications Fall but Purchase Business Rises
Residential loan applications fell by 1.5% on a seasonally adjusted basis last week, but there was a slight improvement in new purchase money loans, according to figures compiled by the Mortgage Bankers Association.
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New Hard Money Trade Group States Priorities
A new trade group that caters to the 'hard money' segment of the mortgage industry has drafted a code of ethics for its members — lenders that are privately held and cater to borrowers who can't get credit elsewhere.
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BDO Hires CRE Expert with Chapter 11 Experience
BDO Seidman has brought on Richard Hauer, a commercial property workout professional, to assist the New York consulting firm's bankruptcy and restructuring professionals on all real estate-related issues.
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Vendor Product Designed to Spot Debt Changes by Borrowers
CoreLogic Credco has unveiled a new product called the LQ GAP report, which is designed to help residential lenders comply with Fannie Mae's 'Loan Quality Initiative' by identifying and summarizing any changes in an applicant's credit report between pre-approval and pre-funding.
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HUD Distributes $1B in Foreclosure Aid
The Department of Housing and Urban Development Wednesday awarded an additional $1 billion of funding to states and counties, earmarking the money for fighting the damage caused in certain neighborhoods by home foreclosures.
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Fiserv Changes Name on Servicing Platform
Fiserv this week rebranded its multiple product loan servicing platform, calling it LoanServ.
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Fed Beige Book: Home Sales Stink
The Federal Reserve, in its new 'Beige Book' report, says U.S. home sales are in the tank again with "evidence of very low or declining" interest from consumers in buying a house.
