Eight Changes to Mortgage Investment in 2016
January 18, 2016 8:00 AM
Agency and government loan programs will be a little different in the next 12 months. There also will be new rules for private-label securitizations, along with new products available to investors. Here is an overview.
Increased Collateral Requirements
Private-label residential mortgage-backed securities issuers as of Dec. 24 will have to retain at least 5% of deal collateral credit risk unless the loans meet criteria for "qualified residential mortgages."
Higher Loan Limits in Some Counties
There are 39 high-cost counties where the Federal Housing Finance Agency will raise loan-purchase size limits for Fannie Mae and Freddie Mac in 2016. Limits for Federal Housing Administration loans that serve as collateral for Ginnie Mae securities will increase in 188 counties.
New Hedging Instruments Available
CME Group's Ultra 10-Year Treasury-Note futures and options will debut on Jan. 11. Agha Mirza, the group's head of interest rate products, says the product can help originators manage mortgage-related risks.
More Leeway for GSE Modifications
Servicers, starting March 1, must calculate a borrower's full mortgage obligation, including the outstanding principal balance, past-due interest and other arrearages, to determine eligibility for a Fannie or Freddie standard or streamlined modification. Previously, just the outstanding principal balance was used.
Fannie to Collect More Credit Data
Fannie in mid-2016 will start requiring loan sellers to use more-detailed credit data, including utilization rates over time, as opposed to static data on payments and balances. Freddie spokesman Brad German said the GSE is also mulling a change.
New Electronic Filing Requirement
Fannie and Freddie plan to take their Uniform Mortgage Data Program a step further by asking mortgage sellers to submit closing disclosure data electronically. They plan to begin collecting this data by the fourth quarter at the latest, with the potential of making it mandatory as early as mid-2017.
More Options for Small Investors
Options for accredited investors should continue to grow. Income&, for instance, plans to buy prime-credit non-QM loans made to non-agency-eligible borrowers such as the self-employed, while also offering notes that reference mortgages' pass-through cash-flows, CEO Brad Walker says.
Fed Hike Puts Upward Pressure on Rates
Higher rates might increase the yield on lenders' typical investments but also could make mortgages less affordable for consumers, which could constrain supply or lead to looser underwriting.
