The banking industry is less than a week away from compliance deadlines for rules that completely change all residential mortgage origination disclosures and the systems which generate and track them.
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Posted: September 30th, 2015 | Permalink
U.S. Rental Trends 2015-2025
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Roadmap to Financial and Housing Market Stabilization Plans Update
Attached please find the September 21, 2015 update to the “Roadmap to Financial and Housing Market Stabilization Plans” document. This update includes the following:
o From 2012 through mid-2015, the GSEs invested $146 million in CSS. The company currently relies on GSE resources, including employees. CSS plans to convert the employees to CSS employees and to stand up its own corporate functions, in the first half of 2016. CSS will continue to purchase certain services from the GSEs.
The CSP has five modules:
Module 1: Data Acceptance. Upon receipt of a securitization request, the Data Acceptance module will endeavor to validate it. The GSE will have an opportunity to correct any errors.
Module 2: Issuance Support. After validation, the Issuance Support module will send data on the security to the NY Fed or DTCC, who will register the security in its system and broadcast summary information to market participants, typically two days before the security will be issued.
Module 3: Master Servicing Operations. Completion of Module 3 and decisions on its use have been deferred until after the GSEs begin issuing Single Securities. The GSEs will continue to validate all loan-level data submitted by servicers, and sending validated loan-level data to CSS for the use of the Bond Administration module. Deferring the implementation of the Master Servicing Operations module reduces the scope of the CSP initiative in the near term so that CSS and the GSEs can focus on preparing for the issuance of Single Securities. The GSEs and FHFA will later determine if and when the module will be used.
Module 4: Bond Administration. This module will calculate pool factors for first-level securities and bond factors for second- and third-level securities and release the factors to the market. For third-level securities, the module will use industry-standard software to track and forecast multi-class payments. Each quarter and each year the module will perform appropriate tax reporting to investors and the IRS.
Module 5: Disclosure. The Disclosure Module will produce loan- and security-level disclosures before the issuance of a security, and monthly throughout the life of the security. Data files will be released for use by data vendors.
FHFA anticipates a 2016 announcement of initial use of Release 1, by which Freddie Mac will use the Data Acceptance, Issuance Support, and Bond Administration modules to perform activities related to its current single-class, fixed-rate PCs and Giant PCs. Release 1 will require the CSP to support data processing for approximately nine million mortgage loans, 500,000 pools, and 250,000 securities. Release 2 will allow both GSEs to use those same modules to perform activities related their current fixed-rate securities, both single- and multi-class; to issue Single Securities, including commingled re-securitizations; and to perform activities related to the underlying loans. Release 2 will also allow Fannie Mae to use the CSP to issue and administer mortgage securities backed by ARM loans.
Today, neither GSE can issue second- or third- level mortgage securities backed by commingled first-, second-, or third-level securities issued by both GSEs. That capability is critical to achieving the Single Security initiative’s objective of enhancing the liquidity of the secondary mortgage market. A first-level mortgage security is collateralized by a single pool of mortgage loans with one class of investors. A second-level security is collateralized by previously issued first- or second-class securities, with one class of investors. A third-level mortgage security is a multi-class security collateralized by a group of previously issued first-, second-, or third-level securities.
The software design principles include:
Open architecture, so the GSEs and CSP users will be able to integrate their IT platforms and exchange data with the CSP using MISMO and other industry data standards.
Functional modularity, so that modules can be modified, configured, or replaced, or that new functionality can be added to a module, with reduced impact on any of the other modules or on the CSP as a whole.
Scalability, so the CSP will be capable of performing well at steadily increasing volumes.
Data transparency to allow changes in the data on individual loans and securities to be traced throughout the securitization lifecycle.
Event automation and straight-through processing, by which defined events trigger further data processing by a separate part of the software that can be called upon when needed.
In a second quarter MHA Report, Treasury projects step increases for HAMP modifications:
83% of HAMP Tier 1 homeowners will experience an interest rate increase after five years.
The first interest rate increase went into effect in Q3 2014 for the earliest group of HAMP modifications, who will begin to experience their second interest rate step-ups beginning in Q3 2015.
Through June 2015, approximately 200,000 homeowners have experienced an interest rate step-up. Based on early results, the rate increase does not appear to have an impact on the performance of these modifications. The percentage of modifications disqualifying in the month following the reset remains consistent with the months leading up to the reset, at less than or equal to 1%.
The majority of HAMP homeowners will experience two to three interest rate increases.
Homeowners who received a modification in 2009-2011 are more likely to experience three to four increases than homeowners who received a modification in 2012-2013, most of whom will experience two increases.
The median amount of the first monthly payment increase is $94, and the median monthly payment increase after the final interest rate increase is $210.
