As unpalatable as it may sound to MBS investors, a hedge fund executive said it’s well past time for the mortgage industry to cut its losses by forgiving principal and re-underwriting troubled mortgages to more traditional criteria in order to revitalize the sector and the broader economy. Michael Corasaniti, chief executive officer of Tourmalet Advisors, a hedge fund in New York City, told attendees at the American Mortgage Conference sponsored by the North Carolina Bankers Association this week that old-fashioned manual underwriting is the way out. “Early in my career, I was...

A trio of industry trade groups is asking a federal appeals court to uphold a nearly century-old law that grants federal-court jurisdiction to civil lawsuits against any U.S. corporation in which claims arise from international banking or banking transactions in a U.S. territory. Last week, the Securities Industry and Financial Markets Association, New York Bankers Association and California Bankers Association filed an amicus brief with the U.S. Second Circuit Court of Appeals on behalf of Bank of America in its MBS lawsuit with American International Group. AIG filed...

Originations of non-agency jumbo mortgages through two quarters in 2012 were 35.8 percent above the pace set in 2011, according to affiliated publication Inside Mortgage Finance. Almost all of the major jumbo lenders are increasing production and the vast majority of originations continue to be held in portfolio. An estimated $37.0 billion in non-agency jumbos were originated during the second quarter of 2012, up 5.7 percent from the previous quarter and up 60.9 percent from the ... [Includes one data chart]

Redwood Trust is set to issue its fourth non-agency jumbo mortgage-backed security of the year, according to presale reports released this week. The $313.22 million non-agency jumbo MBS includes only slight changes to improve on securities previously issued by the real estate investment trust. Sequoia Mortgage Trust 2012-4 is set to receive triple-A ratings from Fitch Ratings, Kroll Bond Rating Agency and Moody’s Investors Service, with 7.30 percent credit enhancement on the highest-rated ... [Includes one data chart]

The government-sponsored enterprises’ guaranty fees will increase by an average of 10 basis points in the coming months as the Federal Housing Finance Agency works to align agency pricing with the private market. An increase earlier this year brought interest rates on agency mortgages slightly closer to the rates on non-agency jumbo mortgages but industry analysts suggest that the conforming loan limits have a greater impact on the market share for non-agency originations. “These increases will move [GSE] pricing ...

The eminent domain proposal from Mortgage Resolution Partners will either painlessly help thousands of non-agency borrowers or severely harm the non-agency market, according to industry participants. The newly expanded plan could even hinder efforts to revive the non-agency market going forward, according to MRP’s opponents. “Eminent domain is an important method for mitigating losses to investors,” Graham Williams, CEO of MRP, said in a comment letter last week to the Federal Housing Finance Agency ...

Lender-related underwriting and disclosure issues have prompted a significant increase in liability for non-agency mortgage-backed security issuers, based on a court ruling last week. The U.S. Court of Appeals for the Second Circuit found that liability extends beyond trusts specifically purchased by investors to potentially all trusts in an issuer’s shelf with mortgages originated by the same lenders. “Investors may now seek to intervene to broaden classes in MBS class actions that don’t explicitly ...

After years of holding off, Homeward Residential last week launched a principal forgiveness program for proprietary loan modifications. The program follows a settlement with the Massachusetts attorney general and success with principal reduction by other nonprime servicers. “We view this program as an additional safety net for borrowers who have limited options,” said Javid Jaberi, an executive vice president of servicing operations at Homeward Residential, formerly known as American Home Mortgage Servicing ...

A California-based lender that had a $400,000 minimum loan amount policy agreed to a settlement with the Department of Justice this week regarding alleged discrimination. Luther Burbank Savings will spend $2.0 million as part of the settlement and is prohibited from implementing a $400,000 minimum loan amount policy. The lender denied the discrimination allegations, did not admit any wrongdoing as part of the settlement and claimed the loan amount policy was tied to its focus on nontraditional mortgages ...

Two Harbors Investment Corp. announced this week that it plans to contribute the real estate owned properties it started acquiring this year to a new affiliated company, Silver Bay Realty Trust. The new company is seeking up to $287.5 million from an initial public offering announced this week and plans to operate as a real estate investment trust. The move from Two Harbors, also a REIT, is somewhat abrupt as the company only started acquiring REO properties to offer for rent in the first quarter of 2012 ...