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 ...

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 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 ...

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]

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 ...

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]

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 ...

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]

VA originations set a new record in the second quarter of 2015 with lenders funding $39.6 billion in VA loans while FHA continued to ramp up its volume, according to new figures compiled by Inside FHA/VA Lending. The latest production result surpassed VA’s previous record origination total of $37.5 billion in the first quarter of 2013. Lenders attributed the increase to their effort to promote the VA Home Loan Guaranty program through broadcast, print and social media “We are doing all we can every day to promote the VA product,” said one VA lender. “Many veterans are not familiar with the program and they don’t know what’s available to them. They don’t understand what the government is actually doing for them through this VA portal.” The VA program allows 100 percent financing on a 30-year fixed-rate single-family mortgage. VA production in the second quarter jumped 58.2 percent compared to ... [2 charts]

Mortgage lenders welcomed the FHA’s implementation of a new supplemental method for evaluating a lender’s performance while expanding eligible, underserved borrowers’ access to mortgage credit. But some say the new metric still doesn’t resolve lenders’ liability concerns. The FHA’s new supplemental performance metric will be used in tandem with the agency’s compare ratio, a measure used by FHA to compare a lender’s default and claim rate with those of its peers to determine whether a lender’s authority should be terminated. Due to the compare ratio being a comparison to one’s peers rather than to FHA’s risk tolerance, lenders have found it difficult to lend to borrowers with credit scores below 640 without running afoul of Neighborhood Watch. Commenting on the FHA’s proposed supplemental performance metric last year, the Mortgage Bankers Association said the compare ratio has created a ...