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Volume 2015 - Number 17

August 21, 2015

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Slow Start for Originations of Near-Prime Non-QMs, Along with a Trailblazing MBS

More than a year after the Consumer Financial Protection Bureau’s standards for qualified mortgages took effect, originations of near-prime non-QMs remain limited. However, industry participants are optimistic that originations will pick up and Lone Star Funds recently jolted the sector with a non-agency mortgage-backed security. The $72 million non-agency MBS from Lone Star was backed by non-QMs originated by Caliber Home Loans, a lender owned by the private-equity firm ...

Rating Services Take Dim View of Alt Doc Loans

Potential issuers of non-agency mortgage-backed securities looking to loosen underwriting standards on loans to be included in MBS are getting tough feedback from rating services. Fitch Ratings said last week that non-qualified mortgages with weak income documentation would likely face a “double penalty” compared with a similar non-QM that meet the documentation standards set for QMs. Non-QMs with “alternative documentation” included in non-agency MBS would ...

Mixed Views on the Value of Jumbo MBS

Issuance of jumbo mortgage-backed securities has slowed somewhat this summer, with a lack of consensus from industry participants on whether it’s worth participating in the market. Barclays Capital, which helps fund jumbo MBS activity, said the deals offer about 50 basis points of option-adjusted spread compared with agency MBS. Analysts at Barclays said newly-issued jumbo MBS are attractive for investors less concerned about liquidity. Officials at Anworth Mortgage Asset Corp ...

Five Oaks Working to Boost Jumbo MBS Issuance

Five Oaks Investment issued its first jumbo mortgage-backed security in April and has plans to significantly increase its activity in the market. “Five Oaks sees a large growth opportunity within the prime jumbo space for institutions with the ability to aggregate, finance, securitize and retain residential mortgage credit risk,” company officials said during a recent presentation to investors. With the $267.2 million Oaks Mortgage Trust 2015-1, Five Oaks aggregated the mortgages in the deal and ...

Subprime Performance Improves, Few Transfers

The serious delinquency rate on subprime mortgages continued to improve in the second quarter of 2015 while the amount of subprime mortgages outstanding also dwindled. An estimated $330.0 billion in subprime mortgages were outstanding as of the end of the second quarter of 2015, according to Inside Nonconforming Markets. The volume was down by 14.5 percent compared with the second quarter of 2014. In that time, the serious delinquency rate ... [Includes one data chart]

Jumbo MBS Servicing Concentrated, Refis Vary

A handful of firms service the majority of loans included in jumbo mortgage-backed securities issued since 2010. Analysts at Wells Fargo Securities noted that prepayment rates vary somewhat among the servicers, offering pockets of value for jumbo MBS investors. Wells Fargo analysts said $25.26 billion in mortgages included in jumbo MBS issued in 2010 and beyond remain outstanding. The top five servicers handle 83.3 percent of the loans, with Cenlar alone claiming ...

GSEs’ Alt A Performance Improves, Losses Persist

Delinquencies are declining in the government-sponsored enterprises’ holdings of Alt A mortgages but outsized losses from the loans remain an issue. Purchased and guaranteed Alt A mortgages account for the largest portion of the GSEs’ remaining involvement in the nonprime market, according to an analysis by Inside Nonconforming Markets. Fannie Mae held $109.70 billion in purchased/guaranteed Alt A mortgages as of the end of the second quarter of 2015 ... [Includes one data chart]

Mixed Results for Ocwen on Settlement, MBS

The monitor of a $2.0 billion settlement involving Ocwen Financial revealed last week that the nonbank was found to have failed another metric under the settlement. However, the monitor noted that Ocwen has worked to address many of the issues that have dogged the company over the past year. The monitor re-tested Ocwen on a number of metrics under the settlement due to concerns that were raised about the integrity of the servicer’s internal review group ...

News Briefs

The $269.29 million jumbo mortgage-backed security that Shellpoint Partners plans to issue next week will be the first to include certain recommendations from the RMBS 3.0 project, according to the Structured Finance Industry Group. Eric Kaplan, a managing director at Shellpoint, helped launch the SFIG’s RMBS 3.0 effort. The representations and warranties on Shellpoint Co-Originator Trust 2015-1 will include a mandatory review upon ... [Includes three briefs]

Subprime Volume Indicators and Performance

A page of subprime and jumbo data.


During the first half of 2015 all residential lenders originated a better-than-expected $805 billion of home mortgages, according to Inside Mortgage Finance. What do you expect in the second half?

Just as good. We like what we’re seeing.
Better. Applications are strong.
Worse. We’re worried about rates, seasonality.
A lot worse. The fourth quarter could be a killer.

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