Subprime mortgage-backed securities offer returns of at least 10.0 percent per year for selective investors, according to Bill Roth, co-CIO at Two Harbors Investment. “We are able to assume the default of a significant portion of borrowers who are currently making their payments, assume a declining housing market and still be able to earn an attractive yield,” Roth said last week during a webinar hosted by the real estate investment trust. He added that home prices could decline by another 20 percent in the next year and ...

Compensation for non-agency mortgage-backed security servicers should be adjusted and the industry should adopt practices from commercial MBS servicing, according to Morningstar Credit Ratings. The firm that recently established its non-agency MBS rating capabilities said enhanced servicing could help revive the issuance of non-agency MBS. “Without these reforms it may prove very difficult to attract investors back into the fold of private-label residential mortgage securities given the weaknesses exposed in ...

Lenders are potentially abusing reverse mortgage borrowers, according to the Consumer Financial Protection Bureau. Last week, the CFPB released a study on reverse mortgages and issued a request for information on the products along with threats of increased regulation. “In some situations the product can be misused in ways that harm borrowers,” said Richard Cordray, director of the CFPB. He noted the age of reverse mortgage applicants and lump sum payments to borrowers as particular concerns. The CFPB’s study ...

Default risk on non-agency jumbo mortgage-backed securities continues to improve gradually, according to economic risk factors applied to Fitch Ratings’ non-agency jumbo MBS loan loss model. The rating service released the economic risk factors for the second quarter of 2012 last week. Fitch said the improvement is tied to home price trends and it expects home prices to “touch bottom” in 2013. New Jersey and New York have the highest default risk in the country, with expected defaults well above ... [Includes three briefs]

Thousands of ineligible tax cheats received FHA-insured mortgage loans under the American Recovery and Reinvestment Act of 2009 even though federal tax regulations prohibited tax debtors from obtaining government-backed mortgages, the Government Accountability Office reported in a new study. The report found that 6,327 borrowers, who owed a total of $77.6 million in federal taxes, were able to obtain more than $1.44 billion in FHA-insured mortgages under the ARRA. Of these borrowers, 3,815 individuals claimed and received $27.4 million under the statute’s temporary First-Time Homebuyer Credit program. The GAO’s analysis included ...

Some FHA borrowers are still having difficulty obtaining lower-cost streamline refinancing even though the FHA has said it will accept streamline loans with “no credit check, income verification or appraisal.” Borrowers said they are still encountering credit checks, income verification and other obstacles, which indicate that lenders are disregarding FHA instructions regarding the enhanced streamline refi program. Even though FHA guidelines are in place, lenders are adding their credit overlays to the detriment of FHA borrowers seeking to ...

Given the features of the enhanced FHA streamline refinancing product, investors will be focusing on the FHA low mortgage-insurance premium (MIP) pools in the coming months, according to analysts with Barclays Research. Barclay’s analysts estimate that 27 percent of outstanding Ginnie Mae MBS pools are eligible for streamline refinancing, which could translate to $36 billion in new annual Ginnie Mae issuance. Approximately $293.0 billion of Ginnie Mae’s $1 trillion-plus 30-year loan pools were originated before May 2009, analysts said. About 79 percent of the collateral underlying the pools are ...

The Consumer Financial Protection Bureau expects to undertake a project to refine and integrate disclosure requirements under the Truth in Lending Act and the Real Estate Settlement Procedures Act for reverse mortgages to improve consumers’ understanding of the product. The In a recent 231-page study submitted to Congress, the CFPB said consumers are still confused about how reverse mortgages work, despite the required disclosures and industry efforts to educate the public on this type of equity-based lending. The rising-balance and falling-equity nature of reverse mortgages is particularly ....

The Department of Housing and Urban Development said it has received $1.2 billion in recent settlements with large mortgage lenders and servicers but HUD’s internal watchdog, which did much of the legwork in the investigations, reveals a much smaller amount. According to recent audit reports published by HUD’s Office of the Inspector General, only Bank of America and Flagstar Bank have made payments under settlement agreements with HUD and the Department of Justice to resolve government claims. In separate memos to HUD’s Office of General Counsel last month, Kim Randall, director of the HUD OIG Civil Fraud Division, sought clearance to ...

Two lenders lost their approval to underwrite and originate FHA loans under Credit Watch while two others may be ordered to indemnify the Department of Housing and Urban Development for potential losses on several ineligible FHA-insured loans. HUD recently stripped Community Central Mortgage Co. of Mount Clemens, MI, and Strategic Mortgage Co. of Columbus, OH, of their direct endorsement approval because of the exceedingly high default and claim rates of FHA-insured loans they originated in their business areas. The Credit Watch Termination Initiative allows HUD to terminate a direct endorsement agreement with any FHA lender if ...