The weak market for jumbo mortgage-backed securities has prompted Redwood Trust to look into other activities beyond a focus on jumbo mortgages. The real estate investment trust started aggregating agency mortgages in October. Martin Hughes, Redwood’s CEO, said the conforming-mortgage activity allows Redwood to create mortgage-servicing rights to hold as investments and potentially participate in risk-sharing activities with the GSEs at the originator level. “This market opportunity is many times ...

Real estate investment trusts working to build their jumbo mortgage-backed security operations note that while the environment is currently challenging, they are optimistic about the long term. “What we’re trying to do is have an originator network in place so that we can take advantage of the opportunities,” said Bill Roth, CIO of Two Harbors Investment. “And it may not be in prime jumbo in the short run.” The REIT issued a $434.17 million jumbo MBS in August, its first. Two Harbors said it ...

With qualified-mortgage underwriting requirements set to take effect Jan. 10, the rating services are beginning to detail the role QM status will play in ratings for non-agency mortgage-backed securities. Fitch Ratings appears to be the furthest along in adjusting its ratings process to account for the Consumer Financial Protection Bureau’s ability-to-repay rule and QM standards. The rating service this week released its initial perspective for rating non-agency MBS with loans originated in a QM world ...

While many lenders say they intend to stick to originating safe-harbor qualified mortgages, some are taking a long look at the non-QM market or even building their strategy on it. Attorneys speaking at the recent annual convention of the Mortgage Bankers Association said rigorous underwriting, documentation and a solid track-record are prerequisites to competing safely in the non-QM space. And though the challenges are substantial, so are the potential rewards. A number of lenders are likely to test the water ...

One last thought on Berkowitz and Fairholme: To get Congress to listen to your ideas you have to donate money. Berkowitz can check that box off his to-do list. He has been a generous donor to Republicans and Democrats alike over the past two election cycles.

Servicing of subprime mortgages almost appears to be on autopilot as performance improves and the amount of mortgages outstanding dwindles. Servicers that once competed to handle subprime mortgages have focused their pursuits on other assets, including agency mortgages and other unspecified financial services sectors. An estimated $418.0 billion of subprime mortgages were outstanding as of the end of the third quarter of 2013, according to a ranking by Inside Nonconforming Markets ... [Includes one data chart]

A looser version of Home Affordable Modification Program loan modifications launched last year is increasing in popularity with non-agency servicers. HAMP Tier 2 allows mods with a broad range of debt-to-income ratios along with rental properties and even vacant homes. Some 11,338 permanent Tier 2 non-agency mods were initiated during the third quarter of 2013, according to the Special Inspector General for the Troubled Asset Relief Program, compared with 10,215 traditional non-agency HAMP mods ... [Includes one data chart]

RBS Securities agreed to settle charges levelled by the Securities and Exchange Commission that the underwriter mislead investors in a $2.2 billion subprime mortgage-backed security offered in 2007. “RBS knew or should have known at the time that almost 30 percent of the loans backing the offering deviated so much from the lender’s underwriting guidelines that they should have been kicked out of the offering entirely,” the SEC said of Soundview Home Loan Trust 2007-OPT1. The mortgages in question were ...

Subprime originations remain subdued. The Federal Reserve’s senior loan officer opinion survey for the third quarter included 68 lenders that originate prime mortgages. However, less than four said they offer subprime mortgages. And nonprime borrowers accounted for 5.82 percent of mortgages originated in the second quarter of 2013, Transunion said this week. Ocwen Financial said a settlement with state attorneys general is still in the works. “In light of the substantial ... [Includes three briefs]

The FHA is working to create a quality-assurance framework with enhanced reporting built around QA results as well as a refined approach to identifying underwriting defects, according to a top agency official. There is much uncertainty in the mortgage market today and one way to address that is to create a clear framework for lenders explaining FHA’s view of underwriting defects, how they are defined as well as their consequences, said Charles Coulter, deputy assistant secretary for housing with the Department of Housing and Urban Development. Speaking at the recent Mortgage Bankers Association annual convention, Coulter said the ...