Nonconforming Securitization

Browse articles from all of our Newsletters related to Nonconforming Securitization.

September 26, 2014 - Inside Nonconforming Markets

Subprime Volume Indicators and Performance

A page of subprime and jumbo data.


September 26, 2014 - Inside Nonconforming Markets

News Briefs

Some 64 percent of 884 community banks originating mortgages offer non-QMs, according to a survey conducted by the Conference of State Bank Supervisors. The results were published this week in a report from the Federal Reserve and the CSBS. Homewood Mortgage is the latest non-agency lender to announce a stated-income product. The program is available only for self-employed borrowers, with stringent requirements regarding liquidity and assets ... [Includes six briefs]


September 26, 2014 - Inside Nonconforming Markets

Strong Demand for Non-QMs, Supply an Issue

There’s plenty of consumer demand for loans that don’t meet the standards for qualified mortgages, according to industry participants. But more than a year after the Consumer Financial Protection Bureau established standards for non-QMs, lenders and investors are still trying to determine the liability posed by the mortgages. Jay Lown, president of Cherry Hill Mortgage Investment, a real estate investment trust managed by Stan Middleman, chairman and CEO of Freedom Mortgage, said Freedom is ...


September 26, 2014 - Inside Nonconforming Markets

Moody’s Touts Transparency with Rating Model

Moody’s Investors Service is working on revamping its process for rating new non-agency mortgage-backed securities, including allowing issuers to use the same loan-level model used in Moody’s rating process. “We are providing an unprecedented level of transparency through publication of our model,” Navneet Agarwal, a managing director of residential MBS at Moody’s, said last week during a webinar hosted by the rating service. In August, Moody’s published a request for comment on its proposed ...


September 26, 2014 - Inside Nonconforming Markets

Chase, Two Harbors Prepare Their Next MBS

JPMorgan Chase and Two Harbors Investment are preparing to issue two new jumbo mortgage-backed securities. The $483.56 million JPMorgan Mortgage Trust 2014-IVR3 is set to receive AAA ratings from DBRS and Kroll Bond Rating Agency. The deal includes a number of unique characteristics, including consisting solely of adjustable-rate mortgages and having representations and warranties that DBRS deemed as weak. The majority of the loans in Chase’s planned MBS are seven-year ARMs ...


September 26, 2014 - Inside Nonconforming Markets

Obama Administration Seeks Non-Agency Changes

A number of steps have been taken to reform the non-agency mortgage-backed security market but more changes are necessary, according to Michael Stegman, counselor on housing finance policy to the Treasury Department. Last week at a conference hosted by the Bipartisan Policy Center, Stegman detailed regulatory changes necessary to increase activity in the non-agency MBS market along with other changes the industry can work toward. “The last remaining piece of the puzzle is putting in place ...


September 26, 2014 - Inside Nonconforming Markets

Treasury Working to Convince Investors New Non-Agency MBS is a Good Deal

The Treasury Department is working on at least two initiatives aimed at boosting issuance of non-agency mortgage-backed securities, following more than four years of industry-driven reform efforts that haven’t attracted enough attention from investors. “The private-label securities market is virtually dormant,” Olga Gorodetsky, a senior policy advisor at the Treasury, said this week at the ABS East conference produced by Information Management Network in Miami Beach. The Treasury is considering working with ...


September 26, 2014 - Inside MBS & ABS

Fitch: Concentration of Servicers Could Squeeze U.S. Residential MBS Landscape

The rapid growth of nonbank special servicers since the mortgage crisis has resulted in a concentration of entities controlling the vast majority of loans in need of a work out, which could present some risks for non-agency MBS, according to a report by Fitch Ratings. Fitch cited industry consolidation, increased specialization and regulation as the primary drivers of the concentration shift toward nonbank servicers. “Historically, servicing was concentrated among the largest commercial banks due to their dominant market share in mortgage origination,” the rating service said. “Today, several nonbank servicers have achieved portfolio sizes that have begun to eclipse their banking counterparts.” Fitch noted...


September 26, 2014 - Inside MBS & ABS

Treasury Sees a ‘Benchmark’ Non-Agency MBS as Potential Spur for Market

The Treasury Department is considering working with an issuer to sell a non-agency MBS that would serve as a benchmark transaction, according to agency officials. The goal of the issuance is to attract investors to the sector and create a standard term sheet for issuers. “The Treasury is thinking about facilitating one or more benchmark transactions,” Michael Stegman, counselor to the Treasury Department for housing finance policy, said this week at the ABS East conference produced by Information Management Network in Miami Beach. He said...


September 26, 2014 - Inside MBS & ABS

Cautious Optimism in Structured Finance Market As New Regulations Ease Compliance Uncertainty

Investors are comfortable with broad swaths of the structured finance market and issuers are cautiously optimistic that regulators won’t hinder activity too much going forward, according to attendees at the ABS East conference produced by Information Management Network this week in Miami Beach. “We’re in a pretty good spot right now in the market from a supply-demand perspective,” said Bob Behal, a principal and co-head of ABS investments and commercial MBS investments at Vanguard Group. Almost 3,700 people had registered by the start of the conference, up slightly from around 3,500 people in 2013. Will Zak, a director at Barclays, said...


September 25, 2014 - Inside Mortgage Finance

Mortgage Servicing Market Contracted Again In Second Quarter, But Portfolio Holdings Grew

The supply of 1-4 family mortgage debt declined again in the second quarter of 2014 despite an uptick in whole loans held in bank, thrift and credit union portfolios, according to an Inside Mortgage Finance analysis. The Federal Reserve Board late last week reported $9.855 trillion in single-family mortgage debt outstanding at the end of June. That was down $4.9 billion from March – a scant 0.05 percent decline, but the second straight quarterly downturn. The increase in mortgage debt outstanding in the third quarter of 2013 increasingly looks like an aberration rather than a turning point. The most recent figure is...[Includes one data chart]


September 25, 2014 - Inside Mortgage Finance

FHFA Official: Congress Should Be Main Arbiter Of the GSEs’ Share of Mortgage Market Activity

Efforts to reduce the government-sponsored enterprises’ footprint using guaranty fees and loan limits should be left to Congress, according to Bob Ryan, a special advisor to the director of the Federal Housing Finance Agency. Meanwhile, officials at the Treasury Department suggest that the FHFA does have a role in setting policy that will inform any housing finance reform action by Congress. In comments this week at the ABS East conference produced by Information Management Network in Miami Beach, Ryan said the FHFA looks to Congress for direction when considering how to run the conservatorship of Fannie Mae and Freddie Mac. “There is nothing in the legislation that suggests the FHFA should shrink the footprint [of the GSEs],” he said. Ryan said...


September 19, 2014 - Inside MBS & ABS

HSBC’s Deal With FHFA Allows for Tax Write-Off; Virginia Sues 13 Banks for $1.1 Billion Over MBS

The Federal Housing Finance Agency late last week announced a $550 million legal settlement with HSBC North American Holdings, leaving just two defendants in the conservator’s civil fraud cases tied to non-agency MBS – but a consumer group is crying foul over what it says are the deal’s lenient terms. The agreement resolves claims against HSBC regarding alleged violations of federal and state securities laws in connection with non-agency MBS purchased by Fannie Mae and Freddie Mac from 2005 to 2007. HSBC – which at one time owned subprime giant Household Finance – noted...


September 19, 2014 - Inside MBS & ABS

Moody’s Ranked First in Non-Mortgage ABS Ratings at Midway Point in 2014, S&P Tops in Non-Agency MBS

Moody’s Investors Service – which has been on the sidelines in the sputtering jumbo MBS market this year – has edged up to become the most active rating service in the non-mortgage ABS market, according to a new Inside MBS & ABS analysis. Moody’s rated 71 ABS over the first half of the year, deals with a total issuance volume of $66.15 billion. That represented 64.5 percent of total non-mortgage ABS issued in the first six months of 2014. Moody’s had its biggest market shares in vehicle finance ABS and student loan deals. Standard & Poor’s ranked...[Includes two data charts]


September 19, 2014 - Inside MBS & ABS

Fitch’s Change to Home Price Modeling Could Reduce Credit Enhancement Requirements on Non-Agency MBS

Fitch Ratings this week proposed changes in how it models home prices for loans to be included in new non-agency MBS. The change means more regions being classified as having sustainable home prices, which could lead to lower credit enhancement requirements on new securities. “The updated Sustainable Home Price model shows a stronger relationship to historical home prices and effectively distinguishes between periods of sustainable and unsustainable home prices,” the rating service said. “Under the new methodology, Fitch’s estimation of overvaluation is typically lower than in the previous model build.” Fitch has incorporated...


September 19, 2014 - Inside MBS & ABS

Non-Agency MBS Market Still Stuck, Experts Agree; Policymakers, Players Discuss Ways to Ignite Growth

The non-agency MBS market remains stuck in the post-crisis doldrums, showing no signs of recovering, according to experts participating at this week’s Bipartisan Policy Center’s Housing Summit in Washington, DC. Efforts to ignite the growth in non-agency securitization channels to help reduce the government’s role in housing finance and draw back private capital have produced little result. Except for sporadic twitches, thanks to a smattering of deals backed by jumbo loans, the non-agency MBS market is barely alive, panelists said. The government, which is working to revive the non-agency market, sees...


September 12, 2014 - Inside Nonconforming Markets

MBS Clean-Up Calls Gaining Popularity

A number of firms that hold vintage non-agency mortgage-backed securities are using their clean-up call options as the outstanding balance in the MBS dwindles. Executing clean-up calls can be more profitable for certain firms than allowing securities to run-off. Chimera Investment is the latest firm to tout its clean-up call strategy. The real estate investment trust said it acquired the rights to $4.8 billion of seasoned subprime mortgages by purchasing subordinate tranches of non-agency MBS issued by Springleaf Finance between 2011 and 2013. The purchase price wasn’t disclosed.


September 12, 2014 - Inside Nonconforming Markets

Impact of SEC’s Reg AB2 Disclosure Rule Unclear

Officials at the Securities and Exchange Commission see the final rule on disclosures recently issued by the federal regulator as bringing major changes to the non-agency mortgage-backed security market. However, whether issuers will offer non-agency MBS subject to the disclosure requirements is largely in the hands of investors that have been willing to buy securities not subject to the SEC’s standards. Beginning in 2017, issuers of publically registered non-agency MBS will have to disclose 270 data points, mostly at loan level. The disclosure requirements in the SEC’s Reg AB2 rule do not apply to 144A offerings, although some observers expect the SEC eventually to extend them to private placements.


September 12, 2014 - Inside MBS & ABS

Court Unseals Whistleblower Suit Against Moody’s; NY Court Dismisses FDIC Lawsuit Versus Banks

A former analyst at Moody’s Ratings has accused the credit rating agency of complicity in the financial meltdown in 2008, while a federal judge in Texas dismissed a government lawsuit against major banks involving non-agency MBS because it was filed too late. In his 2012 whistleblower lawsuit against Moody’s, Ilya Kolchinsky, a former analyst with the firm, alleged that the rating service issued inflated ratings, often “Aaa,” to most risky residential MBS and collateralized debt obligations it reviewed from 2004 to 2007. The lawsuit was brought...


September 11, 2014 - Inside Mortgage Finance

Jumbo Originations Gain Ground in Second Quarter, But ‘Conforming-Jumbo’ Production Lags a Bit

Non-agency jumbo mortgage originations accounted for a historically high 19.4 percent of new lending during the first half of 2014, and the sector is steadily gaining ground, according to a new Inside Mortgage Finance analysis of big-ticket mortgage activity. During the second quarter of 2014, lenders originated an estimated $59.0 billion of mortgage loans that were too big to be financed through Fannie Mae, Freddie Mac or the FHA. That was up 34.1 percent from the first quarter, a noticeably bigger increase than the 25.5 percent jump in total mortgage originations for the period. Compared to last year, jumbo lending was...[Includes three data charts]


September 5, 2014 - Inside MBS & ABS

FHFA’s Goldman Sachs Deal Allows Firm to Recoup Losses; FDIC Too Late to Sue Deutsche, Credit Suisse

The legal settlement between Goldman Sachs and the Federal Housing Finance Agency over soured non-agency MBS sold to Fannie Mae and Freddie Mac featured an unusual buyback of the securities by the investment bank. It leaves just three big defendants left to settle or go to trial, legal observers note. Under the terms of the settlement announced Aug. 22, Goldman is required to pay $3.15 billion to repurchase securities that were the subject of the claims in the FHFA’s lawsuit. The economic value of the settlement is estimated...


September 5, 2014 - Inside MBS & ABS

SEC’s New Disclosure Rule Seen as Costly for Issuers, But Enticing Alternative May Be Unregistered Securities

Issuers of non-agency MBS and commercial MBS, among other structured finance asset classes, are set to face increased costs to comply with a rule from the Securities and Exchange Commission that increases disclosure requirements. But deals that are not issued publicly would avoid the increased costs. Last week, the SEC unanimously adopted a wide-ranging final rule known as Reg AB2, which was first proposed in 2010. By the beginning of 2017, newly issued, publicly registered non-agency MBS will have to include 270 loan-level data points disclosed via the SEC’s Electronic Data Gathering, Analysis, and Retrieval system, known as EDGAR. The required disclosures include...


August 29, 2014 - Inside Nonconforming Markets

Subprime Volume Indicators and Performance

A page of subprime and jumbo data.


August 29, 2014 - Inside Nonconforming Markets

News Briefs

Goldman Sachs agreed to a settlement with the Federal Housing Finance Agency last week to resolve claims about non-agency mortgage-backed securities purchased by Fannie Mae and Freddie Mac before the financial crisis. The FHFA said the settlement will cost Goldman $1.20 billion and the firm will buyback non-agency MBS from the government-sponsored enterprises. The original balance of the securities owned by Fannie and Freddie that Goldman will buyback is ... [Includes five briefs]


August 29, 2014 - Inside Nonconforming Markets

SEC Sets New Rule for Ratings, Due Diligence

The Securities and Exchange Commission this week approved a final rule with new requirements for rating services and due diligence providers. The rule was approved on a 3-2 vote, with the SEC’s two Republican-appointed commissioners chafing at standards required by the Dodd-Frank Act. Among other provisions, the SEC is requiring nationally recognized statistical rating organizations to strengthen their internal controls, establish new procedures designed to protect the integrity of rating methods ...


August 29, 2014 - Inside Nonconforming Markets

BofA Settlement Centers on MBS Disclosures

Bank of America last week agreed to a record settlement with the Department of Justice and others, largely involving non-agency mortgage-backed securities issued from 2003 through 2008. Officials at the DOJ said the settlement focused on disclosures provided by BofA and its affiliates, including Countrywide Financial, First Franklin and Merrill Lynch, to investors in the bonds. “It’s kind of like going to your neighborhood grocery store to buy milk advertised as fresh, only to discover that ...


August 29, 2014 - Inside Nonconforming Markets

Mixed Views on Lowering GSE Loan Limits

Lowering the government-sponsored enterprises’ loan limits is one of the main goals for firms involved in the non-agency market but the effort lacks broad support in the mortgage industry, let alone in Congress. Among those submitting comments to the Treasury Department this month regarding how to increase non-agency activity, the American Bankers Association was one of the biggest supporters of decreased loan limits for the GSEs. The conforming loan limit is at $417,000 and ...


August 29, 2014 - Inside Nonconforming Markets

SEC Revises MBS Disclosure Requirements

The Securities and Exchange Commission this week unanimously approved a final rule covering registration and disclosures for asset-backed securities, including new non-agency mortgage-backed securities. The so-called “Reg AB2” measure requires significant changes for new non-agency MBS, including loan-level disclosures and a three-day waiting period before issuing new deals. “The SEC must protect investors in asset-backed securities just as it does investors in any other security ...


August 29, 2014 - Inside Nonconforming Markets

REITs Ramp Up Jumbo Activity: Conduits, MBS

A number of real estate investment trusts are increasing their presence in the jumbo mortgage-backed security market with conduit programs as well as purchases of subordinate tranches from new MBS. Two Harbors Investment said its jumbo conduit had a pipeline with an unpaid principal balance of $650 million at the end of the second quarter of 2014, more than four times the REIT’s pipeline at March 31. Two Harbors recently issued a $267.67 million jumbo MBS, the first from the REIT this year ...


August 29, 2014 - Inside Nonconforming Markets

Jumbo Production Bounces Back in Second Quarter, Share of Total Originations Soars

Originations of jumbo mortgages increased significantly in the second quarter of 2014 compared with the previous quarter, according to a new ranking and analysis by affiliated publication Inside Mortgage Finance. An estimated $59.0 billion in non-agency jumbos were originated in the second quarter, up 34.1 percent from the previous quarter and reversing two consecutive quarters of declining originations for the jumbo sector. Halfway through the year, jumbo production ... [Includes one data chart]


Poll

Over the next six months we plan to hire this many more additional loan officers:

1 to 10 (We're being careful.)
11 to 30 (We're optimistic.)
More than 30 (We're in a growth mode as the banks get out.)
We're cutting back. (Are you nuts? It's ugly out there.)

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