November 15, 2022 | Premium Service | The annual migration of industry professionals to the IMN MSR East conference in lower Manhattan was well-attended and instructive, though not without some intense debate among participants. The longs are getting a tad bloated as valuations rise, but the shorts in the equity markets are spending a lot of capital to prove they’re right. We'll see.
One of the more amusing impressions from the meetings were reports that our friends at Ginnie Mae continue to search for the magic formula that will encourage depositories to return to government lending and particularly servicing. Given the risks facing depositories from both mortgage securities and loans, don’t hold your breath. Banks will happily originate high-FICO FHA loans with 7s and 8s and retain same in portfolio, but will never return to the Ginnie Mae MBS market because of the high cost of servicing government loans.
Another entertaining snapshot came when a representative of the Council of State Bank Supervisors essentially threw Ginnie Mae under the bus, noting that the CSBS aligned its recommendations for nonbank capital with the Federal Housing Finance Agency. The CSBS representative then repeated concerns about possible mark-to-mark losses for MSRs owned by banks and nonbanks alike arising from implementation of the Ginnie Mae risk-based capital rule. A number of participants at the IMN event echoed these concerns.