Risk-retention rules proposed by federal regulators could limit a popular form of non-prime risk retention, perhaps unintentionally. The treatment of excess spread on non-agency jumbo mortgage-backed securities is also a concern. Tom Deutsch, executive director of the American Securitization Forum, warned that excess spread retained by a deal’s sponsor would not count as risk retention under the qualified residential mortgage proposed rule. In securitizations of non-prime loans, the excess spread typically would be treated as the...

Statutes of limitation will soon force undecided non-agency mortgage-backed security investors into action, according to industry attorneys. Josh Silverman, counsel at Pomerantz Haudek Grossman & Gross, noted that many investors will lose buyback claims if they do not act shortly. In May, Option One Mortgage was the latest non-agency MBS issuer to be hit with repurchase requests. A group of investor clients organized by Talcott Franklin claimed that Option One improperly...

Officials with American Home Mortgage Servicing have proposed a plan that they claim will prompt principal-reduction loan modifications without strategic defaults by borrowers. The proposal involves short sales – not of homes owned by distressed borrowers – but of distressed mortgages held by non-agency mortgage-backed securities.Jordan Dorchuck, an executive vice president, chief legal officer and secretary at American Home, submitted the proposal to the Treasury Department in May. He estimated that...

The impending overhaul of the government-sponsored enterprises’ servicing guidelines will likely have a negative impact on the servicing of non-agency mortgages, according to industry analysts. The agency servicing overhaul includes financial incentives and penalties, which prompted a warning from Moody’s Investors Service. “Because of the incentives and penalties, servicers will likely shift their focus to loans backing the GSEs’ MBS and away from loans in private-label MBS,” Moody’s said. “This shift will mean that...

The Financial Industry Regulatory Authority reached settlements last week with two non-agency mortgage-backed security issuers regarding delinquency data and other reporting requirements. Three other non-prime servicers also recently settled with regulators regarding servicing practices. FINRA fined Credit Suisse Securities $4.5 million and Merrill Lynch $3.0 million for alleged violations of Regulation AB. The issuers neither admitted nor denied the charges. “Credit Suisse and Merrill Lynch failed to monitor and supervise the reporting of historical delinquency rates, depriving investors of...

Officials with Home Equity Securities have started to lobby the Obama administration regarding an alternative to home-equity loans known as the home-equity fractional interest security. HES said the HEFI security could create a market as big as the U.S. stock market without increasing mortgage risk. Under HES’ proposal, a shared-equity investor would match a borrower’s downpayment and share in any home price appreciation. HES received a patent for the product in 2009. HES officials envision...

Jumbo mortgages accounted for 7.7 percent of new loan originations in the first quarter of 2011, the highest share for the sector since 2008. A number of correspondent lenders have also expanded their jumbo programs in 2011. Some $25.0 billion in non-agency jumbos were originated in the first quarter of 2011, according to estimates by affiliated publication Inside Mortgage Finance. That was down 16.7 percent from the previous quarter, while overall originations declined by 35.0 percent during the period. The relative strength of the jumbo market increased...[Includes one data chart]

The FHA could lose 7 percent, or $2.8 billion, of its current business if loan limits are lowered this year, according to a government analysis of the impact of new lower loan limits going into effect in the fall. Barring congressional action, the temporary FHA loan limits will revert by statute to the lower loan limits determined by the Housing and Economic Recovery Act for loans insured by the FHA on or after Oct. 1. The FHA single-family loan limit, which is tied to the conforming loan limit, continues to start at $271,050 in low-cost areas and goes as high as $729,750 in high-cost areas of the country. On Oct. 1, however...

The House Financial Services Subcommittee on Housing, Insurance and Economic Opportunity will conduct another hearing on a Republican proposal to reform government mortgage programs and spur private sector participation in home financing. The Department of Housing and Urban Development, Ginnie Mae and the Rural Housing Services (RHS) will be asked to testify on the draft bill, the “FHA-Rural Regulatory Improvement Act,” which proposes reforms for the three agencies, enhanced lender enforcement tools, and return of private capital to the residential mortgage market. No date has been set for the hearing, and HUD has declined ...