MBS & ABS Performance

Browse articles from all of our Newsletters related to MBS & ABS Performance.

August 26, 2016 - Inside FHA/VA Lending

Purchase Lending Fires Up FHA in First Half, Refis Push VA Volume

FHA saw a modest rise in originations midway through 2016 compared to the same period last year, but VA did a lot better with a double-digit increase in loan production, according to an analysis of Ginnie Mae data. Lenders delivered $123.0 billion of FHA-insured loans to Ginnie pools during the first half of 2016, up 8.4 percent from the previous year. FHA’s midyear production was driven by a surge in purchase-mortgage lending in the second quarter, which also pushed volume higher for VA as well as conventional-conforming mortgages. Government-backed lending rose 32.3 percent from the first quarter to approximately $131.0 billion in second-quarter originations, according to Inside Mortgage Finance, an affiliate publication of Inside FHA/VA Lending. It was the highest three-month total for government-insured lending on record, although private mortgage insurance did more business in the ... [2 charts]

August 26, 2016 - Inside MBS & ABS

Moody’s Seeks Dismissal of Whistleblower FCA Claim, NY Court Reverses Ruling in Favor of MBS Trustee

Moody’s Investors Service has asked the U.S. District Court for the Southern District of New York to dismiss the remaining claim in a lawsuit alleging manipulation of credit ratings leading up to the financial crisis. In its motion to dismiss, Moody’s said that plaintiff Ilya Eric Kolchinksy’s second amended complaint fails to show that the rating agency used its electronic “ratings delivery service” to issue false ratings on MBS that later turned bad. In 2012, Kolchinsky, a former managing director at Moody’s, filed...

August 26, 2016 - Inside MBS & ABS

Credit Suisse Sells $800 Million in Securities Backed By Warehouse Facility on Agency-Eligible Mortgages

Credit Suisse sold two warehouse facility-backed securities this week totaling $800.0 million, according to Moody’s Investors Service. The rating service placed A2 ratings on the Mortgage Repurchase Agreement Financing Trust Series 2016-1 and Series 2016-2 transactions. Much like a warehouse facility security issued by Jefferies in May, Moody’s said the MRAFT securities are structured with two legs of “back to back” repurchase agreements. The first leg consists...

August 26, 2016 - Inside MBS & ABS

Law Firms Publish Joint Paper on CMBS Risk-Retention; First Compliant Deal Closes

In a somewhat uncommon occurrence, four law firms published a position paper late last week aimed at helping industry participants comply with pending risk-retention requirements for new commercial MBS. The paper was written by attorneys at Cadwalader, Wickersham & Taft; Dechert; Orrick, Herrington & Sutcliffe; and Sidley Austin. “The paper was authored...

August 22, 2016 - Inside the CFPB

New Requirements in NY Pose Challenges for Servicers

New legal requirements enacted in the state of New York in the wake of the financial crisis pose particular compliance challenges for mortgage servicers, according to a new report by analysts at S&P Global Ratings. The S&P team recently reviewed a series of laws the state legislature passed in June that attempts to address several issues related to “zombie” foreclosures, which refers to the phenomenon of a servicer initiating foreclosure on a vacant property but not going so far as to actually take title. Urban community activists complain such properties languish unsold for a prolonged period of time, contributing to neighborhood blight in communities least able to handle it – hence, state lawmakers decided to act. One resulting requirement “imposes conditions ...

August 19, 2016 - Inside MBS & ABS

MBS Liquidity Has Its Best Reading in 18 Months as More Supply Hits the Market

The average daily trading volume in agency MBS totaled $219.3 billion in July, the best reading in 18 months, according to the Securities Industry and Financial Markets Association. However, the sequential improvement was a mere 3.30 percent. Then again, any gain is better than none. For all of 2016, the worst reading came in March at $189.4 billion. The strong showing (relatively speaking) comes as the primary market has produced a better-than-expected $890 billion for the first six months of 2016. Some industry executives believe loan originations could top $2 trillion this year, which would increase the supply of outstanding MBS. For the past few years there has been a debate in the industry about the significance of lower trading ...

August 19, 2016 - Inside MBS & ABS

Clean-Up Calls on Non-Agency MBS Increase As Loan Balances on Vintage Deals Dwindle

With balances on non-agency MBS issued before the financial crisis falling to levels where clean-up calls can be initiated, clean-up call activity is rising with prospects for further growth. Rights to clean-up calls on non-agency MBS can typically be exercised when the outstanding balance of the MBS is lower than 10.0 percent of the original balance. The owner of the call rights (typically the master servicer) can purchase loans from the pool at par plus expenses and make a profit by selling or re-securitizing performing loans at a premium and retaining distressed loans to modify or liquidate. According to Bank of America Merrill Lynch, about 37 deals have been called this year totaling about $800 million in unpaid principal balance ...

August 19, 2016 - Inside MBS & ABS

Fitch Sets Rating Cap at ‘A’ for MBS Backed by NPLs, Establishes Standards to Protect Investors

Fitch Ratings released criteria for rating MBS backed by nonperforming loans late last week, saying it will cap ratings for such deals at “A” due to “the idiosyncratic and adverse-selection risk.” As mortgage performance has improved in recent years, issuance of MBS backed solely by nonperforming loans has been limited. However, Fitch said it considers a transaction as an NPL issuance if more than 10.0 percent of the collateral is 60+ days delinquent at the time of issuance. The rating service will require such MBS to meet a number of standards to receive a low investment-grade rating of “A” or “BBB,” including a sequential-pay structure and application of available funds to pay interest to the rated notes. “Absent these structural ...

August 19, 2016 - Inside MBS & ABS

Bank Holdings of Residential MBS Climb to New Record in June, Heavy Increase in GSE Paper

Commercial banks and savings institutions continued to load up on residential MBS during the second quarter of 2016, pushing their investment in the sector to a new high, according to a new analysis and ranking by Inside MBS & ABS. Banks and thrifts reported MBS holdings of $1.684 trillion as of the end of June, a 1.4 percent increase since the previous quarter. These are long-term holdings in banks’ held-to-maturity and available-for-sale portfolios. The industry held another $46.02 billion of MBS in their trading accounts. Not surprisingly, all of the gain came in agency MBS, particularly pass-through securities issued by Fannie Mae and Freddie Mac. The industry’s aggregate holdings of these securities, $867.64 billion, were up 4.1 percent from the ...

August 12, 2016 - Inside MBS & ABS

Fannie Releases Modified Loan Historical Data to Support New MBS Program that May Become Significant Asset Class

Fannie Mae’s new securitization program for modified single-family mortgages could generate as much as $24 billion in issuance, according to an analysis by Bank of America Merrill Lynch. The program will create “an asset class meriting investor focus,” BAML noted. Fannie recently released...

August 12, 2016 - Inside MBS & ABS

SIFMA Seeks Reversal of New York Ruling in Case Involving ‘Gap’ Reps Provided by MBS Sponsor

A ruling late last year by a state appeals court in New York threatens to upend the practice of providing “gap” or “bridge down” representations and warranties on residential MBS, according to a brief submitted on behalf of the Securities Industry and Financial Markets Association. SIFMA asked the New York State Court of Appeals to reverse the lower court’s ruling in Bank of New York Mellon v. WMC Mortgage. Lawyers at the law firm of Stroock & Stroock & Lavan submitted an amicus brief to the N.Y. State Court of Appeals on behalf of SIFMA regarding the case. “The court’s resolution of this issue could have...

August 5, 2016 - Inside MBS & ABS

BofA, Morgan Stanley, Wells Go Vertical on First CMBS to Comply With Risk-Retention Standards

Bank of America, Morgan Stanley and Wells Fargo are preparing to issue the first commercial MBS that will comply with risk-retention requirements, according to presale reports published this week. While industry participants continue to debate which type of risk-retention will be more commonly used, the pending $870.56 million MBS will include vertical retention. Wells Fargo Commercial Mortgage Trust 2016-BNK1 received provisional AAA ratings from Fitch Ratings, Kroll Bond Rating Agency and Standard & Poor’s. Fitch said the three originators contributing to the MBS will retain credit risk representing 5.0 percent of pool balance via the vertical retention option. Risk-retention requirements for commercial MBS take effect...

July 29, 2016 - Inside MBS & ABS

Rated Non-Agency MBS Issued - 2Q16

Non-Agency MBS deals for the second quarter of 2016.

July 29, 2016 - Inside MBS & ABS

Still No Non-Agency MBS from SoFi, but Marketplace Lender Readies Second ABS Backed by Consumer Loans

Marketplace lender Social Finance is preparing to issue a $480.55 million ABS backed by unsecured consumer loans, its second such deal to date. So far, 10 of its 12 securitizations have used student loans as collateral. According to a report by DBRS, SCLP 2016-2 consists of $425.88 million of class A notes and $54.67 million of B notes. The package is expected to price early next week, but at press time no information was available regarding the coupons. The class A notes received...

July 29, 2016 - Inside MBS & ABS

Two Harbors, Five Oaks Exit Jumbo Mortgage Conduit Business, Citing Challenges Buying Loans and Issuing MBS

Two Harbors Investment and Five Oaks Investment separately announced plans to end their jumbo mortgage conduit operations due to profitability issues. “We believe that current and expected mortgage market conditions and competitive pressures will prevent us from growing this business to a scale that meets our long-term goals and financial expectations,” said Thomas Siering, Two Harbors’ president and CEO. The Two Harbors announcement came...

July 22, 2016 - Inside MBS & ABS

Chase to Issue Its Second Large Prime Non-Agency MBS Of the Year, Unclear if Other Big Banks Will Follow

JPMorgan Chase is preparing to issue a $2.65 billion prime non-agency MBS, including a large share of mortgages eligible for sale to the government-sponsored enterprises. While company officials see promise in the new type of securities, industry participants offer mixed projections on whether other big banks will follow its lead. The planned Chase Mortgage Trust 2016-2 received AAA ratings from Fitch Ratings and Moody’s Investors Service. Mortgages eligible for sale to the GSEs account for 55.0 percent of the dollar volume backing the deal. As with the $1.89 billion Chase Mortgage Trust 2016-1 that priced in March, the bank will retain...

July 15, 2016 - Inside FHA/VA Lending

Ginnie Mae Production Up Sharply Across the Board in Second Quarter

Ginnie Mae issuers produced a hefty $125.42 billion of new single-family mortgage-backed securities during the second quarter of 2016, according to a new Inside FHA/VA Lending analysis of MBS data. The government-insured market continued to run hotter than the Fannie Mae and Freddie Mac sector. Ginnie MBS issuance – including FHA’s home-equity conversion mortgage program – was up 31.1 percent from the first quarter, while single-family MBS issuance by the two government-sponsored enterprises rose 26.2 percent over the same period. Excluding HECM, Ginnie issuance was up 31.5 percent in the second quarter. While FHA forward mortgages continued to be the biggest source of collateral, the VA program actually produced a bigger gain, 42.4 percent, from the first to the second quarter. VA production saw a major boost in refinance activity, up 58.4 ... [Includes four charts ]

July 15, 2016 - Inside MBS & ABS

Single-Family Rental Deal Will Prepay for First Time As Progress Shifts Properties to New Securitization

Progress Residential is preparing to issue a new single-family rental security that will lead to the payoff of a $473.2 million deal issued by the firm in 2014. The payoff will mark the first time a single-family rental security has prepaid, according to industry analysts. The planned Progress 2016-SFR1 is a single-borrower single-family rental securitization that was initially planned to be backed by a $657.27 million loan secured by mortgages on 4,068 rental homes, according to ratings by Kroll Bond Rating Agency, Moody’s Investors Service and Morningstar Credit Ratings. A portion of the proceeds will fund the prepayment of Progress 2014-SFR1. The deal issued...

July 15, 2016 - Inside MBS & ABS

Industry Participants Seek Exemption From Related- Party Debt Taxes that Could Apply to MBS and ABS

A new tax policy proposed by the Internal Revenue Service in April aimed at corporate “earnings stripping” tax avoidance maneuvers could cause significant problems for the MBS and ABS markets, according to industry participants. The proposed rule from the IRS under Section 385 of the Internal Revenue Code of 1986 would treat related-party debt as equity, aiming to reduce internal restructurings at foreign corporations by establishing new taxes. The Structured Finance Industry Group’s Tax Policy Committee submitted...


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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