MBS & ABS Performance

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

February 20, 2015 - Inside FHA Lending

VA to Issue Final ‘Qualified Mortgage’ Rule in May

The Department of Veterans Affairs expects to have a finalized Qualified Mortgage (QM) rule by May to help clear up some issues that have arisen since the agency issued an interim final rule last spring. The VA issued the interim QM rule for comment on May 9, 2014, to define which VA loans will have QM status under the ability-to-repay (ATR) rule. Issued by the Consumer Financial Protection Bureau, the ATR rule provided temporary QM status to loans eligible for FHA insurance and guaranties by the VA and the Department of Agriculture’s Rural Housing Service. Eligible government-backed loans must be 30-year fixed-rate with no interest-only, negative amortization or balloon features. Total points and fees must not exceed 3 percent of the total loan amount for loans of $100,000 or more. Loans that meet the definition of a temporary VA-eligible QM are considered as in compliance with the ATR rule. They are designated as “safe harbor QMs,” provided they are not ...

February 20, 2015 - Inside FHA Lending

Tech Issues Delay HECM Financial Analysis Rule

The FHA has delayed the effective date of new guidance that will require reverse mortgage lenders to perform a financial assessment of applicants for a Home Equity Conversion Mortgage. The FHA indicated that the change was necessary to allow vendors and the Department of Housing and Urban Development to align their respective software before the new system can be operational. Those familiar with the technology said delivering the required system enhancements should not take long. The FHA said a new effective date should be expected within 30 to 60 days of the original March 2 effective date. It will be announced in a new mortgagee letter, the agency added. The new guidance requires lenders to evaluate HECM borrowers’ willingness and capacity to meet their obligations and to comply with program requirements. “Financial assessment” means doing a much more ...

February 20, 2015 - Inside FHA Lending

VA Lending Up in 4Q, Year Over Year

VA loan volume continued to rise in the fourth quarter of 2014, driven by low interest rates and a strong demand for the lower downpayment loans, according to an Inside FHA Lending analysis of Ginnie Mae/VA data. The volume of VA loans securitized in Ginnie Mae mortgage-backed securities rose 4.0 percent in the fourth quarter to $107.8 billion from the previous quarter, with more than half of the loans coming through the retail channel. Retailers accounted for $51.5 billion in VA loans securitized during the quarter while correspondents and brokers accounted for $44.4 billion and $11.9 billion, respectively. The overall average FICO score for VA loans was 707, with average loan-to-value and debt-to-income ratios of 95.0 percent and 38.2 percent, respectively, during the quarter. Correspondents came up big with VA purchase loans, accounting for $31.7 billion of the $65.1 billion in total purchase loans produced during the fourth quarter. Retail loan officers accounted for $28.5 billion while brokers brought in ... [ 1 chart ]

February 20, 2015 - Inside Nonconforming Markets

Fitch Cites Origination Practices on Jumbo MBS

A planned jumbo mortgage-backed security from Credit Suisse received some criticism from Fitch Ratings due to concerns about the origination practices of some of the lenders that contributed mortgages to the deal. The rating service increased its default assumptions for the $405.27 million CSMC 2015-1. “Fitch applied a conservative treatment – higher probability of default – due to its limited visibility to the individual lender origination practices ...

February 20, 2015 - Inside Nonconforming Markets

Due Diligence a Priority on Jumbo MBS

With new consumer disclosures from the Consumer Financial Protection Bureau set to take effect in August and lenders still grappling with the ability-to-repay rule, due diligence is likely to continue to be a high priority for loans included in jumbo mortgage-backed securities, according to industry participants. Only a handful of jumbo MBS issued in recent years have included third-party due diligence for fewer than 100 percent of the loans. Issuers have been ...

February 13, 2015 - Inside MBS & ABS

Standard & Poor’s Ranks First in Non-Agency MBS, Non-Mortgage ABS Ratings for 2014

Standard & Poor’s emerged as the top rating service in both non-agency MBS and non-mortgage ABS securitizations in 2014, according to a new Inside MBS & ABS ranking. S&P rated $8.91 billion of non-agency MBS last year, or 25.4 percent of total issuance. Rating information is not available on most scratch-and-dent transactions and re-securitizations that are typically issued as private placements. S&P’s market share was down from 40.0 percent of non-agency MBS issued in 2013, when there were more transactions with multiple ratings. DBRS, which reports its ratings on re-securitizations, actually was involved...[Includes two data charts]

February 13, 2015 - Inside MBS & ABS

Treasury Department, SFIG Making Progress On Efforts to Revive Non-Agency MBS Market

Proponents of the non-agency MBS market continue to work on initiatives to revive the market, with progress somewhat slow but steady. The Treasury Department and the Structured Finance Industry Group are facilitating separate efforts to entice investors to buy new non-agency MBS. At the ABS Vegas conference sponsored by the Structured Finance Industry Group and Information Management Network this week, Olga Gorodetsky, a senior policy advisor at the Treasury, said there’s no timeframe for when the benchmark non-agency MBS the Treasury is trying to facilitate might be issued. “It will be market driven,” she said. Gorodetsky said...[Includes one data chart]

February 6, 2015 - Inside FHA Lending

Accounting Treatment of Past Due Loans Clarified

The Mortgage Bankers Association notched a win for small, independent issuers after the Financial Accounting Standards Board agreed with the group’s position on the accounting of seriously delinquent loans in Ginnie Mae pools. At issue is whether companies that service pools with loans that are 90 days or more delinquent should put those loans on their balance sheet even if they have no intention of buying the loans out of the pool. According to the MBA, a Big Four accounting firm issued controversial guidance which would have been burdensome for small mortgage-backed securities issuers that have limited funding and no incentive or history of buying defective loans out of pools. After months of exchanges, FASB staff finally agreed with the MBA’s view that the decision process involves two steps. First, a loan must be 90 days or more delinquent and trigger ...

February 6, 2015 - Inside Nonconforming Markets

News Briefs

After loosening every month for more than a year, underwriting on jumbo mortgages started to tighten in mid-2014, according to new data from the Mortgage Bankers Association and AllRegs. In the past three months, jumbo underwriting has started to loosen again and standards are the loosest they have been since early 2011. Angel Oak Mortgage Solutions announced that it launched a mini-correspondent offering for non-agency nonprime ... [Includes three briefs]

February 6, 2015 - Inside Nonconforming Markets

Chase Issues Largest Post-Crisis Jumbo MBS

JPMorgan Chase this week issued the largest jumbo mortgage-backed security seen since the market started to return in 2010. The $940.06 million deal was backed by adjustable-rate mortgages originated by First Republic Bank. Previously, the largest post-crash deal was a $666.13 million jumbo MBS from Redwood Trust in February 2013. Prior to the financial crisis, many non-agency MBS had balances that topped $1.0 billion, while most jumbo MBS ...

February 6, 2015 - Inside Nonconforming Markets

Treasury Bid to Revive Non-Agency MBS Starts With Ratings on Freddie Loans

If issuers were to include agency-eligible mortgages with slightly less than pristine underwriting standards in new non-agency mortgage-backed securities, the deals could receive ratings with credit enhancement levels similar to the levels on recent jumbo MBS, according to the results of an exercise released this week by the Treasury Department. Treasury asked six rating services to assign ratings to hypothetical non-agency MBS comprised of $19.75 billion of mortgages ...

February 6, 2015 - Inside MBS & ABS

DOJ, State AGs Announce Historic Settlement with S&P for Misrepresenting Quality of RMBS, CDOs

The Department of Justice and other allied parties this week reached a $1.375 billion settlement with Standard & Poor’s to resolve allegations that the firm’s investment-grade ratings misled investors into buying securities backed by badly underwritten mortgages. The agreement resolves the DOJ’s 2013 lawsuit against S&P and its parent, McGraw Hill Financial Inc., along with the suits filed by 19 states and the District of Columbia. Each of the lawsuits alleges that investors incurred substantial losses on residential MBS and collateralized debt obligations that carried S&P’s ‘AAA’ ratings, which effectively masked their true credit risks. S&P was accused...

January 29, 2015 - Inside Mortgage Finance

Basel Capital Requirements Unlikely to Prompt Big Banks to Sell Servicing, According to Moody’s

Sales of mortgage servicing rights by big banks will continue to be driven by the desire to reduce the handling of delinquent mortgages – not by Basel III capital requirements, according to analysts at Moody’s Investors Service. Nonbank servicers that have grown in recent years often cite Basel capital requirements as a significant factor in bank sales of MSRs. Warren Kornfeld, a senior vice president at Moody’s, noted that Bank of America, Citigroup and JPMorgan Chase were active sellers of MSRs in recent years. “We believe the sales were primarily motivated by their desire to reduce credit-impaired servicing volume,” he said. Under Basel III, banks face...

January 23, 2015 - Inside FHA Lending

GNMA to Launch Issuer Scorecard in the Spring

Ginnie Mae will soon introduce the third prong of a strategy to improve its oversight of participants in its mortgage-backed securities program – a performance scorecard for issuers – and monitoring of its risk. Essentially a “scorecard,” the Issuer Operational Performance Profile (IOPP) will enable issuers to better understand and comply with Ginnie Mae’s expectations. It also provides a way for issuers to measure and improve their performance and compare it to the performance of their peers. Final testing and training for IOPP began this winter, with deployment expected “in early 2015,” the agency said. Issuers will be scored monthly based on a series of metrics. Each issuer will be rated against its peers by applying a weighting algorithm and, in some cases, adjusting for certain control factors. Each issuer will receive two scores: one for operational management and ...

January 23, 2015 - Inside FHA Lending

Low Rates, High Demand Power VA’s 3Q14 Surge

Production of loans with a VA guaranty was moderately strong in the third quarter of 2014, thanks to lower rates and increased demand for the no-downpayment loans, according to Inside FHA Lending’s analysis of the latest agency data. A 14.1 percent quarter-to-quarter surge helped the industry end last year’s first nine months with a total of $76.3 billion in VA loans, mostly purchase home mortgages taken out by a younger generation of war veterans. VA streamline refinancing also accounted for a substantial chunk of originations, 19.2 percent. Volume jumped from $19.5 billion in the first quarter of 2014 to $26.5 billion the following quarter. Lenders closed out the third quarter with $30.2 billion. Stanley Middleman, chief executive officer of Freedom Mortgage, said VA lending is on the upswing, driven by low interest rates. He thinks the VA home loan guaranty program has been ... [ 1 chart ]

January 23, 2015 - Inside Nonconforming Markets

S&P Faulted on Jumbo MBS Surveillance

Standard & Poor’s surveillance of seasoned non-agency mortgage-backed securities backed by jumbo mortgages and Alt A loans played a factor in the $77 million settlement the rating service reached this week with regulators. The Securities and Exchange Commission and state attorneys general for New York and Massachusetts largely focused their settlement with S&P on ratings for commercial MBS. Just $1.0 million of the settlement concerned surveillance of non-agency MBS ...


With the recent dip in interest rates, how do you feel about loan volumes this year?

We see loan production ending 2015 flat compared to 2014.
We’re optimistic that our originations will rise by 10 to 20 percent year over year.
We’re really optimistic: We expect production to increase by 20 percent or better from last year.
We’re not so bullish. Originations for us may actually fall.

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