National Mortgage News Highlights Changes to Mortgage Investment in 2016

National Mortgage News recently featured eight key changes to mortgage investment the industry needs to know about going into 2016. These include:

  1. Implementation of Risk Retention: As of December 24th, PLS issuers will have to retain at least 5 percent credit risk on those transactions unless the loans meet criteria for qualified residential mortgages, per the newly implemented risk retention final rules for RMBS.
  2. Higher loan limits in some areas: The Federal Housing Finance Agency is raising conforming loan limits in 39 high-cost counties around the US. For Federal Housing Administration loans collateralized as Ginnie Mae securities, limits will increase in 188 counties.
  3. New hedging instruments: The CME Group’s Ultra 10-Year Treasury-Note futures and options will become available on January 11th. The product is meant to help originators manage mortgage-related risks.
  4. Greater leeway for GSE modifications: Starting March 1st, servicers must calculate a borrower’s full obligation to determine eligibility for a Fannie Mae or Freddie Mac (“GSEs”) standard or streamlined modification in lieu of the outstanding principal balance that was previously used.
  5. More credit data to be collected by Fannie Mae: In mid-2016, Fannie will begin requiring lenders to use more detailed credit data such as utilization rates over time. Freddie Mac is allegedly considering changing its requirements as well.
  6. New electronic filing required by the GSEs: Under their Uniform Mortgage Data Program, the GSEs will begin asking mortgage sellers to submit closing disclosure data electronically by the fourth quarter of 2016. The program will potentially become mandatory by mid-2017 according to the article.
  7. More options for small investors: According to National Mortgage News, “Options for accredited investors 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…"
  8. Pressure on rates due to Fed hike: Higher rates could mean mortgages are less affordable, possibly constraining supply or leading to looser underwriting. 
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