A look at stories across HousingWire’s weekend desk … with more coverage to come on bigger issues: Wells Fargo (WFC) broke away from rival banks lobbying against new rules that require a mortgage originator to retain risk in loans bundled into securities, according to reports over the weekend. In a November letter to regulators, Wells said only mortgages with a more than 30% downpayment should be exempt from the risk-retention rule under Dodd-Frank. Under the reform, federal regulators must determine which mortgages an originator should still be on the hook for after being packaged and sold in the secondary market. Wells is the largest originator in the U.S. Mortgage application volumes at the San Francisco-based bank drove $101 billion in originations in the third quarter, up 25% from the previous period. JPMorgan Chase (JPM) analysts said 68% of mortgages modified in non-agency MBS loans hold increased loan balances, according to a report released late Friday. For the majority of these mortgages, the balance due increased above the amount at origination, and not just for those modified before the Treasury Department began pushing mortgage servicers to rewrite loans. With the amount of modifications, the analysts estimate this is true for 19% of all non-agency securitizations. Roughly 71% of the modifications saw capitalization rise above the original loan balance in 2010, compared to 65% for those completed in 2008. “On average, recapitalization added about 4- 6% to current [Loan-to-Values], making already distressed borrowers even more under water,” according to the report. Prepayment speeds on 30-year Fannie Mae and Freddie Mac MBS continued to pickup in November as more delinquencies in these pools could be on the way, according to market commentary from Annaly Capital Management (NLY), which oversees portfolios from investors. Prepayments increased 6% on Fannie MBS from the previous month and 8% on Freddie notes. Analysts said the majority of the increases came from better-credit borrowers at lower coupon stacks than bad-credit borrowers in the higher coupon stacks, a trend for several months. While delinquencies peaked in early 2010 in the Fannie and Freddie portfolios, more will be on the way. While some borrowers may cure, “the vast majority” will fall into foreclosure or short sale, further pressuring home prices and more involuntary prepayments. However, analysts said the oversupply of homes on the market should decrease throughout 2011, and demand for the attractive yields of agency MBS should “remain robust” from money managers, foreign buyers and well-capitalized banks. The Altos Research 10-city composite index of home prices dropped 0.45% in November. But, according to the data firm, such decreases are in line for what is normally expected this time of year. Over the last three months, national home prices have declined just over 2%. The biggest drop came in Washington, D.C., where prices fell 3.41% from October. Prices fell in 23 of the 26 major markets monitored by Altos. “Several markets are starting to show potential stability in home prices, including cities such as Miami, which begins its seasonal uptick before the national market,” according to the November report. CoreLogic will release its report on the amount of underwater homes in the third quarter early Monday. Reports last week surfaced that the Obama administration is applying more pressure on Fannie Mae and Freddie Mac to write down more underwater mortgages through the Federal Housing Administration‘s Short Refi program, but analysts have said that the program faces many hurdles on the way to curing the housing market even if the government-sponsored enterprises join the program. Regulators closed two banks Friday, a first in the last three weeks. So far in 2010, 151 banks have closed, nearly a dozen more than the 140 in 2009. Last week’s closings are expected to cost the Deposit Insurance Fund $113.1 million total, according the Federal Deposit Insurance Corp. The Michigan Office of Financial and Insurance Regulation closed Paramount Bank. The Michigan-based Level One Bank assumed all $213.6 billion in total deposits and agreed to purchase essentially all $252.7 million in total assets. The FDIC estimates the closing to cost the DIF $90.2 million. The Secretary of Banking of the Commonwealth of Pennsylvania closed Earthstar Bank. Polonia Bank will assume all $104.5 million in total deposits, and agreed to purchase $77.1 million of the $112.6 million of assets. The FDIC will retain the rest for a later sale. The expected cost to the DIF is $22.9 million. Write to Jon Prior.

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