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Volume 2016 - Number 15

July 15, 2016

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Chase Readies New Prime Non-Agency MBS with GSE-Eligible Mortgages

JPMorgan Chase is preparing to issue its second large prime non-agency mortgage-backed security with loans eligible for sale to the government-sponsored enterprises, according to documents filed with the Securities and Exchange Commission this week. While there has been some speculation about the benefits big banks will see from such MBS, Marianne Lake, Chase’s CFO, said the Chase Mortgage Trust transactions are attractive to the bank. “We’re keeping the ...

Jumbo Conduit Stops as Annaly Acquires Hatteras

Annaly Capital Management completed its acquisition of Hatteras Financial this week, prompting a hold on jumbo operations at Hatteras, according to a message reviewed by Inside Nonconforming Markets. Hatteras formed its jumbo conduit, Onslow Bay Financial, in 2013, with a focus on adjustable-rate mortgages. In a note sent to conduit sellers recently, an official at Onslow Bay Financial said Annaly notified the conduit that the real estate investment trust stopped ...

Mixed Results in Moody’s Review of Redwood

An aggregator review of Redwood Trust by Moody’s Investors Service included an affirmation of an “above average” assessment of the firm’s prime jumbo activities along with some criticism of Redwood’s quality control process, among other issues. Moody’s assessment of Redwood’s quality control and audit activities was lowered from average to below average “because Redwood eliminated its independent third-party review quality control process in lieu of due diligence results ...

Jumbo MBS Underwriting Loosens Slightly

Underwriting characteristics on the jumbo mortgage-backed securities issued in the second quarter of 2016 loosened slightly, according to a new analysis by Inside Nonconforming Markets. The average combined loan-to-value ratio increased somewhat compared with recent quarters and average credit scores declined. Small fluctuations in average debt-to-income ratios have also been seen in the past years. The underwriting characteristics for ... [Includes two data charts]

Impact of Deal Agent Differs Based on Type of MBS

The costs and benefits of a deal agent will vary based on loan characteristics, according to a new analysis by Fitch Ratings. Costs for jumbo mortgage-backed securities will be relatively low, while costs for nonprime MBS will be higher, along with potentially greater benefits when assessing the representations and warranties on a deal. Non-agency MBS issuers continue to work toward including a deal agent in new transactions as some investors have called for the feature ...

SEC Charges Against Thornburg Officials Rejected

A federal jury in late June ruled in favor of former officials from Thornburg Mortgage in a lawsuit brought by the Securities and Exchange Commission in 2012. The charges centered on disclosure and accounting issues the jumbo lender faced in early 2008. The trial involved 10 counts against Larry Goldstone and Clay Simmons, the former CEO and chief financial officer of Thornburg, respectively. The jury ruled in favor of the former Thornburg officials on six counts and was ...

Investors Push for Upgrade of Ocwen’s Ratings

Investors in non-agency mortgage-backed securities serviced by Ocwen Financial released a report this week calling for Standard & Poor’s to upgrade Ocwen’s servicer ratings. In June 2015, S&P downgraded Ocwen Loan Servicing’s servicer ratings to “below average,” citing regulatory issues and investor scrutiny along with concerns about internal audits at Ocwen. The downgrade is a focus for some investors because some of the non-agency MBS serviced by Ocwen have ...

News Briefs

Social Finance is originating $70 million per month in jumbo mortgages and is considering issuing a jumbo mortgage-backed security, according to industry participants that have met with officials at the marketplace lender. Adjustable-rate mortgages accounted for approximately 25.0 percent of jumbo originations in May, according to Black Knight Financial Services. The firm said the jumbo ARM share of originations has declined from 29.0 percent as recently as ... [Includes five briefs]

Subprime Volume Indicators and Performance

A page of subprime and jumbo data.


The yield on the benchmark 10-year Treasury fell to all-time low of 1.34% recently. How much better will originations be at your shop in the second half compared to 1H, if at all?

Better by 1% to 10%.
Better by 11% to 25%.
Off the charts better. Applications are great now.
Worse than 1H, but not by much.
A lot worse. But not sure on the damage.

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