MBS investors this week continued to bid up the price of agency product in the wake of rock-bottom oil prices and economic fears about Asia, Europe and any oil-producing nation that relies too heavily on the energy sector. According to figures compiled by MBS Quoteline, at one point this week investors were paying 105.10 for Fannie Mae MBS with a coupon of 3.5 percent. Back in October the bid on the Fannie 3.5 was a mere 101.83. “Who would pay 105...
The Basel Committee on Banking Supervision recently proposed replacing credit ratings with loan-characteristic metrics for determining capital requirements on bank holdings of residential MBS and commercial MBS. Federal regulators in the U.S. note that the proposal is preliminary and any changes to U.S. capital requirements will go through a notice and comment process separate from the BCBS’ activity. The current standardized approach established by Basel for determining capital requirement riskweights prescribes the use of external credit ratings for residential MBS and commercial MBS, among other holdings by banks subject to capital requirements. “While acknowledging that credit rating agencies play an important role in financial markets and that external credit assessments provide valuable information that may assist in the analysis of credit risk exposures, the hard-wiring of external credit assessments into standards, laws and regulations may often lead...
Bank of America’s never-ending litigation woes spilled into 2015 as Ambac Assurance hit the bank with a new lawsuit related to toxic mortgages. Credit Suisse and Wells Fargo also welcomed the new year facing MBS lawsuits. According to analysts at Stone Fox Capital, an investment advisory firm, Ambac is claiming $600 million in losses, which arose from insuring approximately $1.7 billion in MBS transactions from 2005 to 2007. The MBS were issued by Countrywide Financial, which BofA acquired in 2008 and has been the principal cause of its legal headaches ever since. Ambac emerged...
Fannie Mae – and perhaps, Freddie Mac – over the past few years have been quietly extending servicing advances to a handful of large nonbank specialty servicers, but it now appears that market might be shifting to Wall Street. Late last month, Green Tree Servicing signed a $1.2 billion servicing advance facility with Barclays Bank, a 12-fold increase from a previous agreement the nonbank had. Barclays is...
The strong growth in issuance of jumbo mortgage-backed securities seen since 2010 stumbled in 2014, according to a new ranking and analysis by Inside Nonconforming Markets. Some $9.79 billion in jumbo MBS were issued last year, down 25.4 percent from activity in 2013. Issuance has been constrained by bank portfolio demand for jumbo mortgages. The spike in interest rates in 2013 led to nine months of very low issuance. Rates have since fallen and a number of new jumbo MBS issuers have entered the market, but quarterly volume has struggled to reach the levels seen in early 2013. Those looking for a silver lining could...[Includes one data chart]
Jumbo lenders continue to loosen underwriting requirements in an effort to compete for volume. Some lenders are even offering jumbos with loan-to-value ratios as high as 95 percent, while three years ago a 70 percent LTV ratio was the norm. “We’ve seen a fairly rapid loosening of standards on jumbo loans,” said Michael Fratantoni, chief economist at the Mortgage Bankers Association, during an event hosted this week by the Urban Institute. “They’re still tight, but now you can get a 5 percent down jumbo loan. And minimum credit scores have been coming down.” The MBA’s Mortgage Credit Availability Index has shown...
Ocwen Financial agreed to a $150 million settlement with the New York Department of Financial Services in late December. Officials at the nonbank said Ocwen’s focus will shift to non-agency servicing and originations in 2015. The settlement includes a number of provisions beyond the monetary penalty. To acquire mortgage servicing rights – the fuel for Ocwen’s dramatic growth in recent years – Ocwen must receive approval from the NYDFS and meet performance benchmarks. The NYDFS will also appoint...
Bank and thrift holdings of home-equity loans continued to decline in the third quarter of 2014, according to the Inside Mortgage Finance Bank Mortgage Database. However, the two top banks increased their HEL holdings from midyear, and industry analysts expect home-equity lending to continue to increase in 2015. Banks and thrifts held a total of $991.27 billion in home-equity lines of credit, HELOC commitments and closed-end second liens as of the end of the third quarter of 2014, down 0.7 percent from the previous quarter and down 3.9 percent from the third quarter of 2013. Most of the top 10 bank and thrift HEL lenders saw...[Includes one data chart]
The risk-sharing transactions that Fannie Mae and Freddie Mac started offering in 2013 have drawn some investors away from buying new jumbo mortgage-backed securities, according to industry participants. The government-sponsored enterprises say the deals that share credit risk with investors help reduce taxpayer risk. However, the returns and risk profile of Freddie’s Structured Agency Credit Risk deals and Fannie’s Connecticut Avenue Securities deals have caused some investors to abandon jumbo MBS and instead invest in the GSEs’ offerings. Aaron Pas, a senior vice president of non-agency portfolio management at American Capital Mortgage Investment, said...
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