April, 2012

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THE LATEST ORIGINATION securities as announced in September. The committee is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. Fannie Mae Launches Loan-Level Disclosure Initiative The GSE shoots for better transparency, moving forward with loan-level disclosures for single-family mortgage-backed securities. F annie Mae recently announced an initiative to make loan-level data for single-family mortgage-backed securities (MBS) accessible as a move toward transparency. The government-sponsored enterprise has started releasing loan-level data and will provide data updates regularly. Laura Simmons, VP of MBS disclosure policy and operations for Fannie, said of the program, "We believe that disclosing loan-level data is an important step towards meeting our investors' desire for enhanced transparency." Continuing her statements, Simmons added, "In subsequent releases, we expect to be able to provide additional data elements in the loan-level at issuance file and provide monthly updates to the loan-level data." The first release of loan-level data files for single-family MBS is down- loadable and published under the "New Issues Statistics" tab in PoolTalk, which is a tool that retrieves pool-level information and data on Fannie Mae securities. Following the initial release, Fannie Mae stated it expects to pro- vide initial data elements and monthly updates to the loan-level data. Concurring with the release of the loan-level data will be new features on PoolTalk, including the ability to view data on a specific pool and monitor data for specific securities at a glance. Daily issuance files, monthly sta- tistics, and MBS-related documents will be accessible through PoolTalk. Many Banks Could Be on Track for Losses Fitch Ratings forecasts murky future for financial institutions struggling to deal with mortgage loans within their portfolios. T he U.S. banking industry will continue to suffer from overexposure to residential mortgage loans for the near future, with the nation's top financial institutions likely to feel the burn more than others, according to Fitch Ratings. The ratings agency said in a recent research note that it estimates that declines in home equity will lead to more than $80 billion in losses for the top 20 financial institutions over the next three years. The projections reflect a loss rate of 5.1 percent on loans in the combined amount of $1.6 tril- lion, less than an aggregate loss rate of 8.4 percent seen since the financial crisis but historically high even so. "U.S. banks' exposure to home equity loans is one of Fitch's top concerns," the ratings agency said. "Most of these loans are on bank balance sheets and are concen- trated at the largest institutions. As a majority of them are sub- ordinated, performance remains very much leveraged to further home price declines and potential principal reduction initiatives." Fitch said that it believes in a "reasonable probability" that material losses could result for these portfolios, with any that approach their baselines for stress tests likely to suffer nega- tive ratings changes. It also predicted that national home prices will fall by as much as 8 percent to 10 percent over the next several years—a reality that may not be far off, as a Standard & Poor's (S&P) Case- Shiller Index in recent weeks fielded 3.8 percent in declines for home prices in December. Along with Moody's Investors Service and S&P, Fitch is a Nationally Recognized Statistical Rating Organization (NRSRO) officially recognized by the Securities and Exchange Commission. The three remain at the center of controversy for AAA ratings they assigned to junk mortgage- backed securities during the financial crisis. Experts said in past interviews with MReport that critical outlooks released by the NRSROs—for banks, industries, and countries— suggest corrective action to restore their credibility among policymak- ers and market watchers. THE M REPORT | 39 ORIGINATION SERVICING ANALYTICS SECONDARY MARKET

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