Prepayment rates on non-agency jumbo MBS issued beginning in 2010 have been high as interest rates have declined significantly since then. However, industry analysts suggest that refinance activity is likely to be much lower for recently issued non-agency jumbo MBS as interest rates have stabilized at low levels, if not started to increase. “Stable mortgage rates are making refinancing less attractive to the newest mortgage borrowers, which should keep prepayment rates on loans originated over the last several months slower than those originated between 2010 and 2012,” said Grant Bailey, a managing director at Fitch Ratings. Only 12.6 percent of the original balance on the $237.84 million non-agency jumbo MBS issued...

A number of significant former members of the American Securitization Forum are working to form a new trade group, with a formal announcement possible as soon as this week. Meanwhile, Tom Deutsch, executive director of the ASF, said his group continues to work with more than 300 members. As many as 30 firms could be a part of a new securitization trade group, with the name “Structured Finance Industry Group” being considered. Wells Fargo has confirmed that it will be a member of the new group. Other firms that recently quit the ASF’s board or otherwise ended their membership with the ASF include...

Fannie Mae and Freddie Mac could suffer losses of nearly $2 billion on the fair value of their assets if interest rates fluctuate upward by just a single percentage percent, according to the Federal Housing Finance Agency’s official watchdog. A white paper issued this week by the FHFA’s Office of Inspector General found that despite moves by the Finance Agency and the Treasury to require the two government-sponsored enterprises to substantially downsize their mortgage asset portfolios, interest rate risk remains a “significant concern.” “The increasingly illiquid nature of the GSEs’ mortgage asset portfolios presents...

Redwood Trust recently came to market with a $287.5 million convertible debt offering which was snatched up by investors – a sign that not only is the real estate investment trust doing well with its jumbo securitization business, but other mortgage issuers might meet similar results if they need to borrow money in the capital markets. Mike McMahon, a managing director at the company, told Inside MBS & ABS that the jumbo issuer decided to tap the debt market as “a way to support our investment activity for 2013. If we securitize $7 billion and retain the subs, we will need capital.” Redwood hopes...

The U.S. Supreme Court last week unanimously decided a securities fraud case that could cause the Securities and Exchange Commission to act sooner rather than later in bringing enforcement actions against MBS fraud. In Gabelli et al. v. Securities and Exchange Commission, SCOTUS ruled that in an SEC action to recover civil penalties, the five-year statute of limitations begins ticking when the fraud occurs, not when it is discovered. Reversing an opinion by the U.S. Court of Appeals for the Second Circuit, SCOTUS rejected...

The available supply of residential MBS grew marginally during the fourth quarter of last year as the agency market grew enough to offset the ongoing decline in outstanding non-agency MBS, according to a new analysis by Inside MBS & ABS. The supply of single-family agency MBS increased by $48.1 billion during the fourth quarter, a 0.9 percent increase over the three-month period. The Federal Reserve gobbled up all the increase and then some; its total agency MBS holdings rose by $91.6 billion during the fourth quarter, an 11.0 percent increase from the previous period. Mutual funds appeared to hold...[Includes two data charts]

Mary Jo White, the nominee to chair the Securities and Exchange Commission, said this week that enforcement actions against Wall Street firms and implementation of rules relating to credit ratings will be two of her many priorities if she is confirmed as head of the SEC. Industry analysts suggest that the Senate will easily confirm her nomination. “At the SEC, there’s no institution too big to charge,” White said at a hearing this week by the Senate Committee on Banking, Housing and Urban Affairs. The comment was...

A U.S. Senator’s call for a Department of Justice investigation into whether Lender Processing Services used an improper fee structure to double-bill underwater homeowners for servicing fees related to processing foreclosures and bankruptcies is off the mark and old business, say industry observers. In a letter sent last week to Attorney General Eric Holder, Sen. Ron Wyden, D-OR, cited concerns brought to his attention by an industry professional that Jacksonville, FL-based LPS engineered a scheme to charge homeowners or mortgage investors for foreclosure-related legal services provided by the company’s preferred network of law firms. Banks using LPS network law firms would receive free access to the firm’s mortgage-processing software, according to the letter. “The ramifications of this case, however, seem...

A new General Accounting Office report said adopting a VA guaranty model for the FHA would result in better-quality loans, a strong capital reserve and even tougher lender overlays that could result in fewer FHA borrowers. The new GAO report reiterated a previous assessment that adopting a VA guaranty model for FHA would have advantages and disadvantages but made no recommendation either way. Private mortgage insurers and others have put...

A number of industry representatives are calling on the Consumer Financial Protection Bureau to carefully test its pending integrated consumer disclosure forms under the Truth in Lending Act and Real Estate Settlement Procedures Act before they are actually put into use. At issue is the CFPB’s proposal to conduct quantitative testing in fiscal years 2013 and 2014 of the performance of the current disclosures versus the proposed disclosures forthcoming later this year. “In 2008, the Department of Housing and Urban Development finalized...