July 2012

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THE LATEST SECONDARY MARKET First-Quarter HARP Refinances "The Volcker Rule alone is staggering in its length and complexity. It's staggering. I'm concerned that it's going to limit the ability of banks to manage risk. It's going to have a huge cost. It's going to reduce liquidity in the markets." — Sen. Pat Toomey (R-Pennsylvania) T Fire at Congressional Hearing Republican senators vocal about the future of the Volcker Rule and other portions of the reform act. Dodd-Frank Comes Under T with lawmakers from the right charging that the reform law will impose arbitrary rules that limit consumer choice and prevent an economic recovery. The huge $3 billion trading he Dodd-Frank Act fell under scrutiny at a hearing of the Senate Banking Committee, loss that befell JPMorgan Chase in May hovered over much of the hearing. Committee chairman Sen. Tim bureau's recent moves to hire new examiners and regulate the mortgage marketplace. But much of the light fell on leaving nearly 300 other rules to complete or propose. The lawmaker began a testy interagency efforts to finalize the controversial Volcker Rule, a rulemaking requirement under Dodd-Frank that bans short-term proprietary trading by systemi- cally important financial institu- tions like Chase. "The Volcker Rule alone is Johnson (D-South Dakota) opened the hearing by saying the Chase loss "is a clear reminder that Wall Street continues to need better risk management, vigorous over- sight, and, if the rules are broken, unyielding enforcement." Consumer Financial Protection Bureau (CFPB) Director Richard Cordray appeared before the committee—the 18th time a representative of the agency has done so—in defense of the 72 | THE M REPORT staggering in its length and complexity," Sen. Pat Toomey (R-Pennsylvania) told regulators, vaguely referencing exceptions to the rule and rulemaking "inven- tions" by regulators. "It's stagger- ing. I'm concerned that it's going to limit the ability of banks to manage risk. It's going to have a huge cost. It's going to reduce liquidity in the markets." He said that Dodd-Frank so far includes 398 rulemaking requirements, 110 of which have been finalized by regulators, exchange at one point with Comptroller of the Currency Thomas Curry. Addressing FDIC Acting Double NUMBERS FROM THE FHFA SHOW THAT REFINANCING LEVELS HAVE NEARLY DOUBLED SINCE THE FINAL QUARTER OF 2011. the number of refinances in the fourth quarter of 2011, according to the Federal Housing Finance Agency's (FHFA) March 2012 Refinance Report. The report showed that 180,185 he number of loans refi- nanced through HARP in the first quarter of 2012 was nearly double loans were refinanced through HARP during the year's first quarter, nearly twice the 93,190 refinances in the previous quarter. The month of March alone saw 79,470 loans refinanced with HARP, and nearly one in seven loan refinances in the quarter was done through program. The FHFA attributed most of this increase to the launch of HARP 2.0, an enhanced version of the program that eliminated loan-to-value (LTV) ceilings for borrowers who refinance into fixed-rate loans and lowered or eliminated fees for certain borrowers. Before the program was Chairman Martin Gruenberg, he said that he observed the federal regulator saying in a recent speech that "the typical path toward the failure of an insured bank starts with bad loans. The biggest risk of banking is lending and the risk inherent to that process." When Curry said the lending by saying, "That's what I thought. Lots of regulation. Documentation. Concentration requirements. Supervision of activities." Cordray said the CFPB soon " Toomey interrupted him means to finalize a "larger participants" rule that will clarify regulatory requirements for banks and nonbanks. changed, fixed-rate mortgages had an LTV ceiling of 125 percent. More than 4,400 underwater loans with LTVs greater than 125 percent were refinanced in the first quarter of 2012. Other factors contributed to the increase in HARP refinances. Numbers shot up in the first process would receive "considerable focus, few months of the year with news that mortgage rates were falling to historically low levels. February marked a new low record for mortgage rates and was the start of a sharp spike in refinance activity. As the year's second quarter went on, mortgage rates continued to fall. More than 1.2 million loans have been refinanced through HARP since the program began in 2009. Only loans guaranteed by Fannie Mae or Freddie Mac are eligible to participate in HARP. SECONDARY MARKET ANALYTICS SERVICING ORIGINATION

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