Fannie Mae and Freddie Mac are designing a securitization framework that will work for today’s fully-guaranteed residential MBS as well as securities with a partial government guaranty or none at all, according to an update released this week by the Federal Housing Finance Agency. Among the initiatives set for the government-sponsored enterprises by the FHFA is the development of a contractual and disclosure framework (CDF) designed to give MBS investors more clarity and confidence about what they’re buying. Along with the common securitization platform, the CDF project is a major component of the MBS architecture of the future that the GSEs are building. A lot of the CDF work involves...

The Consumer Financial Protection Bureau released a final rule last week regarding long-running efforts to integrate mortgage-disclosure documents. The new “Know Before You Owe” forms will be required beginning Aug. 1, 2015. Lenders will be required to give potential borrowers a loan-estimate form within three business days after receiving a complete loan application. The form replaces the early Truth in Lending Act statement and the Good Faith Estimate required by the ... [Includes three briefs]

The five-year transition toward a non-agency market contemplated in government-sponsored enterprise reform legislation in the Senate is far from guaranteed, according to industry participants. A number of questions have been raised about the timing and the ability of private players to replace the GSEs. “The idea that ‘if you build it, they will come,’ may work in the movies, but you are playing with the nation’s housing-finance system,” James Millstein, chairman and CEO of Millstein & Co., an advisory group ...

Jumbo conduits have made strong progress in controlling for risks from non-retail mortgages, according to Moody’s Investors Service. The rating services tend to view retail originations as the safest channel due to lower risk of fraud. While loans from brokers have traditionally performed worse than loans from other channels, jumbo conduits have implemented a number of measures to reduce fraud risk. “New Penn Financial, for example, contacts borrowers directly with well-scripted calls designed to ...

Due diligence can be a more significant factor in the rating of a jumbo mortgage-backed security than the representations and warranties on the deal, according to Kroll Bond Rating Agency. However, major investors in non-agency MBS have expressed concerns about due diligence on new deals along with the adequacy of disclosures. At a structured-finance investor conference hosted by KBRA this month, the rating service noted that it doesn’t adjust expected losses or credit enhancement for variations in ...

Non-agency lenders that plan to originate qualified mortgages suggest that one of their top concerns is meeting the debt-to-income ratio requirements. Only non-agency mortgages will have to have a back-end DTI ratio of 43 percent or below to be classified as qualified mortgages under the Consumer Financial Protection Bureau rule taking effect Jan 10. Average DTI ratios on mortgages in jumbo mortgage-backed securities are well below that limit – 34.0 percent on the latest deal from Redwood Trust ...

JPMorgan Chase announced two separate settlements recently totaling $17.5 billion regarding non-agency mortgage-backed securities issued before the financial crisis. A $13.0 billion settlement was reached with federal and state entities, while a tentative $4.5 billion settlement was reached with non-agency MBS investors. The Department of Justice said the $13.0 billion settlement involving the Residential MBS Working Group established by President Obama was the largest settlement with a single entity ...

The annual loan limit announcement from the Federal Housing Finance Agency included mixed news for the non-agency market. The FHFA said both the conforming and high-cost loan limits for the government-sponsored enterprises will be unchanged for 2014. However, a reduction to the maximum loan sizes Fannie Mae and Freddie Mac can purchase is still under consideration. “Further information on potential future changes in the maximum size of loans that Fannie Mae and Freddie Mac guarantee will be ...

The jumbo mortgage-backed security market may be thawing slowly. Credit Suisse this week issued its first security since the end of August, and Redwood Trust issued its latest jumbo MBS this month after a similar pause in securitization activity. The $301.90 million deal by Credit Suisse received an AAA rating from DBRS and Standard & Poor’s with credit enhancement of 7.55 percent on the top-rated tranche. Mortgages in CSMC 2013-IVR5 seasoned for an average of four months and had an average interest rate ...

Mortgage credit availability, loan quality and lenders’ ability to foreclose on distressed properties remain big issues as lenders try to adjust to a more difficult, more complex regulatory environment, according to industry participants in a symposium hosted last week by the Urban Institute. While private capital is available, potential investors are wary of investing in the new environment of qualified and non-qualified mortgages and on mortgage companies and ventures that have drawn much regulatory scrutiny, panelists said. The average credit scores on a conventional-conforming purchase loan has increased...