The status quo in the MBS market – suffocating domination by Fannie Mae, Freddie Mac and Ginnie Mae – isn’t likely to change for the next five years, or longer, according to industry experts at this week’s ABS East conference in Miami sponsored by Information Management Network. Although a number of industry groups have offered proposals similar to the third option outlined by the Treasury Department in its reform white paper – a more competitive market of issuers backed by private capital that issue MBS with backstop guarantees from the government – those proposals are far from uniform, said Laurie Goodman, senior managing director at...

Federal regulators ran into such a buzz saw of opposition on their proposed implementation of Dodd-Frank Act risk-retention rules for securitization that they may start over again with a new proposed rule, according to industry experts at the ABS East conference sponsored by Information Management Network. The market would be better off if regulators abandoned the risk-retention rule altogether, said Steven Kudenholdt, co-chair of capital markets practice at SNR Denton. He doubts that regulators can get it right, and the proposal has been a “distraction” for a market that’s still in distress. Throwing in...

Despite a rare new issue backed by current production jumbo loans, the non-agency MBS market hit a record low in the third quarter of 2011. Just $1.86 billion of new non-agency MBS came to market in the third quarter, a significantly lower number than the previous low reached at the height of the financial crisis in the third quarter of 2008, when $2.15 billion of securities were issued. There was a huge fall-off in resecuritization activity. Just $301 million of these deals were issued in the third quarter, less than a tenth the volume in the previous three-month period. In addition to the...(Includes three data charts)

Most of the major players in mortgage securitization support some of the new disclosures floated by the Securities and Exchange Commission in its revised shelf eligibility proposed rule – with a number of key changes and clarifications. Reflecting the investor’s perspective, the Asset Management Group of the Securities Industry and Financial Markets Association again “enthusiastically supported” the SEC’s proposal to mandate standardized disclosure at the asset level, believing that all of the asset-level data fields should be mandatory. “Well functioning markets require the disclosure of as much relevant asset-level data as...

Continued stress in the prime non-agency MBS sector, rising delinquencies and the use of a new loan-level loss model have prompted Fitch Ratings to revise loss expectations for more than 40 percent of non-agency pools backed by prime mortgage loans. A recent review of 1,154 rated transactions backed by prime collateral, consisting of approximately 15,000 bonds, caused Fitch to affirm or upgrade an estimated 58 percent of the prime non-agency MBS portfolio and to downgrade the remaining 42 percent, according to a report by the rating agency. At least 60 percent of the downgraded MBS were rated...

The performance of large mortgage servicers of non-agency residential MBS, including their ability to prevent or cure loan delinquencies, varied widely during the 12 months ending in June 2011, due in no small part to foreclosure moratoria imposed on some, but not all, servicers, according to Moody’s Investors Service. The company’s inaugural Servicer Dashboard report found that during the June 2010 to June 2011 period, JPMorgan Chase and Bank of America exhibited overall poor servicing performance in contrast to CitiMortgage, GMAC and Ocwen. A major impediment to Chase and BofA’s servicing performance, Moody’s noted, was the fact that...

“Is a 30-year FRM always the best option for consumers?” asked Sen. Richard Shelby at a hearing held by the Senate Banking, Housing and Urban Affairs Committee this week. The Alabama Republican was raising an issue that lies at the foundation of any new mortgage finance system the government may try to cook up. The 30-year FRM, a staple in the U.S. housing market for generations, has come to rely on the separation of credit risk and interest rate risk that results from a government-backed mortgage securitization system. “Securitization by Fannie and Freddie make them possible,” said John Fenton, president and CEO of Affinity Federal Credit Union. “Without...

“We have to reduce uncertainty to bring private capital back,” Shaun Donovan, secretary of the Department of Housing and Urban Development, said at the Mortgage Bankers Association’s annual convention last week in Chicago. Industry participants remain divided on if or when non-agency securitization will resume in a significant manner. Daniel Arrigoni, president and CEO of U.S. Bank Home Mortgage, said U.S. Bank and other lenders must think about developing non-agency securitization capabilities as the federal government works toward reducing its involvement in housing finance. ...

A regulatory scare from the Securities and Exchange Commission may end up being much less of a challenge for real estate investment trusts than the stiff competition they face from bank portfolios, according to experts at the ABS East conference sponsored by Information Management Network this week in Miami Beach, FL. In September, the SEC rattled the mortgage REIT sector – which has struggled to gain a foothold in the nonconforming mortgage market – by launching a formal fact-finding mission on maintaining the exemption REITs enjoy from the Investment Company Act. ...

The lower loan limits instituted this month for conforming mortgages opened a number of regional opportunities for non-agency lenders. As of Oct. 1, 250 counties have lower government-sponsored enterprise loan limits compared with the conforming loan limits of 2010, according to an analysis by affiliated publication Inside Mortgage Finance. Michael Fratantoni, vice president of single-family research and policy development at the Mortgage Bankers Association, said the portion of the market newly eligible only for non-agency financing is significant in comparison to the amount of non-agency jumbo originations in recent years. ... [includes one data chart]