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The federal government is trying to get taxpayers off the hook for billions of dollars of potential losses if another mortgage crisis arrives — and in the process, it is quietly giving birth to a new asset class, the Wall Street Journal reported today. Under government control, mortgage-finance giants Fannie Mae and Freddie Mac next year plan to ramp up sales of new types of securities that in effect transfer potential losses in a housing downturn to private investors. Called Connecticut Avenue Securities by Fannie Mae and Structured Agency Credit Risk by Freddie Mac, the securities are essentially bonds whose performance is tied to that of a pool of mortgages. If the mortgages default, investors in the bonds could lose some or all of their principal. Proponents of the risk-transfer deals see them becoming a mainstay of the bond and housing markets over time, perhaps even entering major bond indexes tracked by mutual funds and exchange-traded funds.

It is taking home buyers longer to get a mortgage, which some in the real-estate industry say is the result of new federal rules meant to make mortgage terms easier to understand, the Wall Street Journal reported today. Mortgages took an average of 49 days to close in November, a three-day increase from October and the longest closing time since February 2013, according to mortgage-processing firm Ellie Mae. Behind the scenes, some lenders describe disarray as various parties in real-estate transactions carry different interpretations of the same rules. The changes, implemented by the Consumer Financial Protection Bureau in October, replace the forms borrowers receive when they make an application and before they close on a mortgage. The new forms are meant to make mortgage terms and fees clear. The rules also require lenders to give borrowers final terms of a loan at least three business days before closing to ensure they have time to understand the agreement. Lenders say that both changes resulted in large technical and training challenges. Advocates for the changes say they are a common-sense response to the housing crisis, during which it became apparent that many borrowers didn’t understand the ramifications of terms such as teaser rates or growing principal balances. They note that lenders had more than a year to prepare for the changes.

In the longstanding debate about what should be done to overhaul Fannie Mae and Freddie Mac, the mortgage behemoths that taxpayers rescued at the height of the financial crisis, a growing number of groups, including several hedge funds and other investors, as well as civil rights groups and consumer advocates, are offering a surprising answer: Go back to the very system we just bailed out, according to a commentary in today’s New York Times. In September 2008, after the two institutions had racked up tens of billions in losses that had wiped out their capital, and amid fears about what their insolvency might mean for the American housing market and the wider economy, the then newly created Federal Housing Finance Agency stepped in to place Fannie and Freddie in conservatorship. Taxpayers have backstopped the two institutions and their mortgage securities ever since. Yet, hard as it is to imagine, given the colossal scale of this bailout and the dramatic effect that their failure had on the broader economy, many are arguing that we should now resurrect Fannie and Freddie as the privately owned but taxpayer-backed oligopoly whose collapse contributed mightily to the financial turmoil and resulting Great Recession.

Many homeowners don’t realize they have home equity to tap, while banks have pulled back on loan amounts and other types of loans have become cheaper, the Wall Street Journal reported today. Home equity has roughly doubled to $12.1 trillion since house prices hit bottom in 2011, according to the Federal Reserve. As a result, a key gauge of housing wealth — homeowners’ equity as a share of real estate values — is nearing the point seen a decade ago, before the downturn. In the first half of the year, owners borrowed $43.5 billion against their homes with home-equity loans and lines of credit, according to trade publication Inside Mortgage Finance. That was 45 percent higher than in the first half of 2014, but scarcely a quarter of the amount seen when equity was last as high in 2007. Meanwhile, cash-out refinances, which let homeowners take out a new mortgage and tap some of the home’s value at the same time, were up 48 percent in the three months ended in August from the year-earlier period, according to Black Knight Financial Services. But they remain below the level seen in the summer of 2013.

Federal prosecutors are actively pursuing criminal cases against executives from Royal Bank of Scotland Group PLC and JPMorgan Chase & Co. for allegedly selling flawed mortgage securities, the Wall Street Journal reported today. Officials are working to establish that the bankers ignored warnings from associates that they were packaging too many shaky mortgages into investment offerings and are weighing whether they can prove that constituted fraud. At RBS, prosecutors are scrutinizing a $2.2 billion deal that repackaged home mortgages into bonds in 2007. In a 2013 civil settlement with RBS, the Securities and Exchange Commission described the lead banker on that deal, whom it didn’t name, as trying to push it through over concerns of the diligence department. At J.P. Morgan, prosecutors are focusing on two people who worked on a different residential-mortgage deal.

The black population of Baltimore is double that of the white population, but in 2013, banks made more than twice as many mortgage loans to whites in the city as they did to blacks, the New York Times reported today. The stark difference in mortgage lending, derived from the most recent government mortgage data, is the focus of a new study that will be released today by the National Community Reinvestment Coalition, a consumer advocacy group. Some bankers contend that the tougher stance of the government since the 2008 financial crisis has reduced the number of borrowers who qualify for loans and increased the likelihood that the banks will have to take losses if they take back loans backed by the government. As a result, according to these critics, less-creditworthy borrowers, many of them minorities, are being denied mortgages.

The Federal Housing Administration will report Monday that its reserves met the minimum threshold required by law for the first time since 2009, a turnaround for an agency that just two years ago required a taxpayer bailout, the Wall Street Journal reported today. The rapid improvement is likely to prompt calls for the FHA to do more to bring first-time home buyers back into the market. An annual audit, performed by an independent actuary, said that the FHA insurance fund’s net worth at the end of September was $23.8 billion, up from $4.8 billion in September 2014. Read more.

October featured the highest monthly percent increase in foreclosure starts since August 2011, according to RealtyTrac's U.S. Home Sales Report released on Thursday. During that month, the foreclosure process began for 48,605 properties, an increase of 12 percent from the month before. While this was the highest monthly percent increase in quite some time, the figure remained 14 percent below the level seen a year ago. Overall, RealtyTrac reported that foreclosure filings, including default notices, scheduled auctions and bank repossessions, went up 6 percent to 115,134 properties in October from the month prior.