Returns on non-agency structured finance products declined in the third quarter of 2015 compared with the previous quarter, according to industry analysts. The shift appears to be due to macro issues as opposed to declining underwriting or performance. “The third quarter wasn’t a particularly happy quarter for non-agencies, with brakes on issuance and pullback in returns,” analysts at Bank of America Merrill Lynch said in a new report. “The latter half of the third quarter was characterized...

The performance of U.S. residential MBS keeps getting better, thanks mostly to favorable economic conditions, but the effects of greater regulatory oversight and intervention can be positive or negative, and sometimes both, depending on what hat a participant in the secondary market wears, according to experts at Moody’s Investors Service. “RMBS performance continues to improve, and that’s mainly because of the confluence of two factors: fewer borrowers are becoming delinquent for the first time because of the economy, and re-default rates on loans which have been modified – which is a significant share of the population of private-label MBS loans – continue to be stable,” said Youriy Koudinov, vice president and senior credit officer at Moody’s. “The second point we want to convey is...

Did anyone expect the yield on the benchmark 10-year Treasury to be hovering at just over 2.0 percent as November approached? Not really, but the recent downdraft in rates has once again caused bond prices – MBS in particular – to increase, a development warming the hearts of investors. Then again, MBS investors hedging their positions might be...

A new loan origination defects and remedies framework to reduce buybacks was released by the government-sponsored enterprises last week, and lenders who spoke with Inside MBS & ABS said it may not be groundbreaking, but it is a step in the right direction. Jeremy Potter, general counsel and chief compliance officer with Norcom Mortgage, said, “We were really happy with the outcome. It seems like the industry has been working with them and this is a good team effort.” He said...

In an about face, the Basel Committee on Banking Supervision is preparing to allow for the use of credit ratings as a gauge for credit risk when setting bank capital requirements. If the move isn’t adopted by U.S. regulators, industry participants suggest that domestic banks could be at a disadvantage. In a speech late last week, Stefan Ingves, chairman of the BCBS, acknowledged that the Basel committee’s December 2014 proposal to revise the standardized approach for credit risk wasn’t well received. “The response was both vigorous and clear: not many of you liked the proposals,” he said. Ingves said...

The Inspector General of the Department of Housing and Urban Development has warned users not to rely on Ginnie Mae’s fiscal years 2011-2014 financial statements after expressing displeasure over the agency’s inadequate explanation of material misstatements identified during a 2014 audit. The warning came in a memorandum the HUD IG issued in response to Ginnie’s restatement notification on Sept. 16, 2015, commenting on the fiscal 2014 audit report. The audit left certain issues unresolved due to its limited scope, causing the IG to issue a disclaimer of opinion on the FY 2014 financial statements. Specifically, the uncertainty focused...

Originations of purchase mortgages outpaced refinances in the jumbo market in 2014, according to a new ranking and analysis by Inside Nonconforming Markets of Home Mortgage Disclosure Act data. Some $135.88 billion in jumbo purchase mortgages was reported under HMDA in 2014, accounting for 60.6 percent of loans that exceeded agency conforming loan limits, including those in high-cost markets. In 2013, purchase mortgages accounted ... [Includes two data charts]

Caliber Home Loans is touting its non-agency product line as a way to provide mortgages to borrowers with less-than-pristine credit who cannot qualify for conforming loans. The nonbank is backed by Loan Star Funds, which has raised more than $1.0 billion for funding non-agency mortgages, according to William Pendleton, senior vice president of portfolio lending at Caliber. “We believe we are in the best position of all major lenders to remain on the cutting edge of product ...

The Consumer Financial Protection Bureau issued a final rule this week that will significantly expand the data collected under the Home Mortgage Disclosure Act. Many of the newly required data fields are aimed at giving federal regulators better information regarding discriminatory lending practices. The reporting requirements will start to take effect at the beginning of 2018. Among the new fields required to be reported under HMDA are credit scores, debt-to-income ratios ...

Fitch Ratings placed a negative outlook on a number of servicer ratings for Caliber Home Loans this week. The rating service said the revision from a stable outlook was due to “rapid growth and heightened regulatory scrutiny.” Caliber was the 19th-ranked servicer as of the end of the second quarter of 2015, according to affiliated publication Inside Mortgage Finance. The nonbank handled a $75.23 billion portfolio, which increased by 27.1 percent compared with ...