Commercial banks and thrifts reported a modest decline in their non-mortgage ABS investments during the second quarter of 2014, although several key sectors showed growth, according to a new analysis and ranking by Inside MBS & ABS. Bank call reports show that the industry held $171.2 billion of non-mortgage ABS in portfolio as of the end of June. That was down 0.8 percent from March, marking the second straight quarterly decline after bank ABS holdings hit a record $173.8 billion at the end of 2013. Bank holdings of auto loan ABS actually increased...[Includes one data chart]

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...

MBS industry observers had hoped that federal banking regulators would clear up any confusion about the treatment of collateralized mortgage obligations and real estate mortgage investment conduits when they finalized new liquidity coverage ratio rules last week. The regulators gave some hints, but did not spell out a position. The rubber will meet the road when examiners start going over individual banks’ portfolios for compliance with the LCR rule, which requires banks to maintain sufficient quantities of highly liquid assets to meet their cash needs in a financial emergency. The final rule classifies...

Ranieri and Goodman are worried that the creation of a single GSE security could morph into a drawn out and multi-year process.

Investors are paying up for distressed mortgages these days, fueling talk that the market might see more in the way of securitizations. “Buyers of non-performing loans want to securitize,” said Brian Dunn, senior vice president of MountainView Capital Group. “They like the [real estate mortgage investment conduit] structure.” According to Dunn, the securitization of nonperforming mortgages “has taken off...

The Federal Housing Finance Agency’s “single security” proposal for generic Fannie Mae and Freddie Mac MBS is “well-thought out” and “worthy of serious consideration,” but the agency should pick up the pace in its implementation to avoid making the solution part of the problem, according to a paper by the Urban Institute. Laurie Goodman, director of the UI’s Housing Policy Center, and Lewis Ranieri, chairman of Ranieri Partners, expressed concern that the FHFA “may be contemplating a slower pace in the project than it warrants.” The FHFA last month issued...

Six years after the government takeover of Fannie Mae and Freddie Mac, the former regulator of the government-sponsored enterprises noted that the housing finance system has made “significant progress.” But even as critical structural changes are underway, comprehensive improvement is still several years out. In a policy paper issued last week, Edward DeMarco – new senior fellow-in-residence for the Milken Institute’s Center for Financial Markets – said that house prices, as measured by the Federal Housing Finance Agency, have recovered more than 50 percent since their decline in 2007. “While the damage from the housing crisis has been substantial, we are finally seeing...

As written, the proposed rules from the FHFA could cause mortgage insurance premiums to spike.

The days of the megabanks – Wells Fargo, JPMorgan Chase and Bank of America – buying mortgage companies (of any size) are over. Never again. Right?...

Redwood Trust’s planned $329.95 million jumbo mortgage-backed security is the second straight MBS from the issuer to have adequate geographic diversity, according to Fitch Ratings. Almost every jumbo MBS issued since 2010 has taken a hit from default expectations and had higher credit enhancement because of geographic concentration. Sequoia Mortgage Trust 2014-3 is scheduled to be issued around Sept. 19. Fitch, Kroll Bond Rating Agency and Moody’s Investors Service gave the deal preliminary triple-A ratings with credit enhancement of 6.55 percent on the top-rated tranche. The credit enhancement level is one of the lowest in recent years on jumbo MBS backed by 30-year fixed-rate mortgages. It is particularly low considering that due diligence was completed on less than 100 percent of the loans, and the MBS will include two loans that do not meet standards for qualified mortgages.