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Some nonbank issuers of mortgage-backed securities are wrestling with capital pressures, and Ginnie Mae has cooperated with their efforts to sell chunks of mortgage-servicing-revenue streams to investors.
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There are a lot of consumer, investor and regulatory complaints about how the nonbank servicing firm does business, but Morgan Stanley researchers offer reasons why certain investors and borrowers could benefit from sticking with Ocwen.
But derivatives that magnified their performance woes were the bigger culprit, according to a new book by investor Howard Hill, who created models for collateralized mortgage obligations before the meltdown.
An expected rush of refinancings of Federal Housing Administration loans could force some mortgage servicers to take writedowns in the first and second quarters, but they have more incentive than ever to keep borrowers in the FHA program instead of letting rivals lure away their customers.
The entire industry needs to advocate for
Proposals for stiffer capital requirements will reduce the number of mortgage servicers, which in turn will cut access to credit, mortgage-company executives said at an industry conference on Wednesday.
Some newcomers to mortgage servicing did not hedge because hedging would have increased costs. Had rates moved up, the strategy would have paid off handsomely. Instead, it worked against them.
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