Recent proposals by the Securities and Exchange Commission could eliminate or impose more regulatory burden on mortgage real estate investment trusts and complicate securitizations, experts warned. The SEC earlier this month launched a preliminary effort to reconsider the exemption that REITs currently have from the Investment Company Act. Although the agency did not propose any specific changes, the REIT industry and its supporters see the initiative as a potential game-changer for how they do business. The SEC concept release, at first blush, appears to “signal impending regulatory burdens for mortgage REITs and to...

Now may be a good time for ABS investors to broaden their horizons and look into exotic asset classes, such as solar panel financing. “Over the past few decades, most of the sheer volume of securitizations has come from the cash flows of consumer asset receivables, such as mortgages, credit cards and auto loans,” said Chris DiAngelo, a partner with Katten Muchin Rosenman LLP in New York City, who moderated an industry discussion on nontraditional securitizations sponsored by the American Securitization Forum this week. “Although the auto market has returned to relatively normal issuance volumes, mortgage and...

The supply of MBS in the market edged slightly higher in the second quarter of 2011, appearing to stem a nearly two-year decline in the market, according to a new Inside MBS & ABS analysis. A total of $6.58 trillion of MBS were outstanding at the end of June, up 0.3 percent from the first quarter. The MBS market was still down 1.7 percent from a year ago. All of the growth came from Ginnie Mae and Fannie Mae. The supply of Ginnie single-family MBS rose 4.0 percent in the first quarter, hitting a record $1.12 trillion and extending a vigorous growth trend since the housing market began to unravel in 2007. Ginnie MBS accounted for...(Includes one data chart)

Although the outlines of an expanded Home Affordable Refinance Program are far from clear, MBS analysts say the most likely changes designed to help more borrowers take advantage of record low mortgage rates will not have a disastrous impact on the MBS market. Observers note that there are two ways to expand the potential HARP population: remove the existing chronological restriction (loans made prior to June 2009) or lift the current loan-to-value restriction of 125 percent. The chronological restriction is relevant because a lot of borrowers who have used HARP already could benefit from refinancing again because...

Redwood Trust is set to issue a non-agency mortgage-backed security backed by $375.2 million in jumbo mortgages, marking the issuer’s – and the mortgage market’s – second new jumbo deal this year. Fitch Ratings is giving a AAA rating based on its new tougher standards, though it remains unclear whether another service will rate the transaction. A presale report issued last week by Fitch noted the strong characteristics of Redwood’s Sequoia Mortgage Trust 2011-2. ...

Guarantee fees up, loan limits down. Reform of the government-sponsored enterprises is set to begin with subtle adjustments to Fannie Mae and Freddie Mac pricing, not with sweeping legislation from Congress. Federal Housing Finance Agency Acting Director Edward DeMarco noted that the guaranty fees charged by the GSEs have already started to increase, and further gradual increases will be implemented next year. ...

“Sept. 2 was the most significant day for mortgage crisis litigation since the onset of the crisis in 2007,” Isaac Gradman, managing member of IMG Enterprises, said in reference to the non-agency mortgage-backed securities lawsuits filed by the Federal Housing Finance Agency. He predicted that the involvement of the U.S. government in mortgage litigation will encourage more private litigants to file lawsuits seeking securities law claims and buybacks. Gradman, whose MBS consulting firm specializes in analyzing contractual rights, potential liabilities and MBS regulation, said the FHFA lawsuits could provide plaintiffs with a roadmap to recoveries. ...

Banks and thrifts appear to be replenishing their first lien portfolio holdings while not taking on major amounts of new servicing, according to the Inside Mortgage Finance Bank Mortgage Database. Banks and thrifts held $1.70 trillion in first-liens in portfolio at the end of the second quarter of 2011, up 0.2 percent from the previous quarter.Portfolio holdings were down 0.9 percent compared with the second quarter of 2010. Bank portfolios are largely being used to hold mortgages that meet underwriting guidelines for the government-sponsored enterprises ... [includes one data chart]

Restrictions by the government-sponsored enterprises have not stopped one company from offering Property Assessed Clean Energy program loans. FIGtree Energy Resource Company, a San Diego company, is offering the California PACE program – only for non-agency jumbo mortgages in certain jurisdictions. PACE programs offer loans for energy-efficiency home improvements. Beginning in July 2010, the GSEs stopped purchasing PACE-related mortgages that had automatic first lien priority over previously recorded mortgages. ...

The Treasury Department has not sufficiently enforced rules for newer components of the Home Affordable Modification Program, according to a review released last week by the Government Accountability Office. Treasury officials acknowledge that the agency has not met all of the GAO’s recommendations but made no guarantees of tighter enforcement. “Treasury has experienced challenges in implementing the newer Making Home Affordable programs,” the GAO said, citing problems with the Principal Reduction Alternative, Second Lien Modification and Home Affordable Foreclosure Alternatives programs.