Bank of America won a favorable ruling this week on its proposed $8.5 billion settlement with a group of non-agency mortgage-backed securities investors. With the settlement likely to be decided in state court, analysts suggest that the deal will serve as a model for other non-agency MBS disputes. Baupost Group, a distressed debt fund that has challenged the settlement under the name “Walnut Place,” succeeded in October in having the settlement moved to federal court. However, the Second Circuit Court of Appeals determined this week that the settlement should be overseen by the Manhattan State Supreme Court ...

Wells Fargo announced last week that it will increase its originations of non-agency jumbo mortgages and home-equity loans. The loans will be held in portfolio, at least initially. “The market has changed and we are adapting with it to add more horsepower to help homeowners and home buyers succeed financially,” said Brad Blackwell, newly promoted to portfolio lending business manager at Wells Fargo Home Mortgage. Wells said Blackwell’s team will work closely with the Community Bank and the Wealth Brokerage and Retirement groups at Wells to assure ...

Acquisitions boosted Ocwen Financial to the top subprime servicer spot at the end of 2011, according to a new ranking and analysis by Inside Nonconforming Markets. However, that was not the only significant movement among the top five subprime servicers, as American Home Mortgage Servicing changed more than its name. Ocwen serviced an $84.73 billion subprime portfolio at the end of 2011, a whopping 49.9 percent increase compared with the end of 2010. During that time, the amount of subprime mortgages outstanding decreased by 9.2 percent to an estimated $545.0 billion ... [Includes one data chart]

Originations of non-agency jumbo mortgages increased 32.1 percent in the fourth quarter, aided by a modest reduction in Fannie Mae and Freddie Mac loan limits in high-cost markets and a surge in refinance lending. An estimated $37.0 billion in jumbos were originated in the fourth quarter, lifting annual production to $118.0 billion in 2011, a 13.5 percent increase from the previous year. It was the jumbo market’s best year since 2007 for origination volume, and jumbos accounted for 8.7 percent of total mortgage lending ... [Includes one data chart]

Tough underwriting criteria, negative equity and tremendous regulatory uncertainty remain major hurdles to non-agency mortgage securitization, but people are at least thinking about new deals. Securitization players are still moving forward on a very cautious basis, according to Melanie Gnazzo, a partner in the structured finance and tax practice groups in the San Francisco office of law firm Chapman and Cutler. “We regularly look at term sheets for products that would provide financing for restructured mortgages and there are more inquiries focused on dusting off old shelf filings...

Wells Fargo & Co. is looking to hire an independent third-party expert to continue an investigation started by the bank in its capacity as corporate trustee of mortgage trusts that could compel lenders to repurchase soured mortgage loans contained in a 2007 non-agency MBS. According to reports, Wells Fargo wants to hire Law Debenture Trust Co. of New York to look into alleged defects in loans contained in Bear Stearns Mortgage Funding Trust 2007-AR2 and to force JPMorgan Chase and its servicer subsidiary to repurchase the bad loans. Requests for comment to both Wells Fargo and Law Debenture had not...

There are additional signs of emerging investor interest – and perhaps more importantly, actual capital – for plowing into mortgage-related bonds, residential and commercial alike. Earlier this week, the Federal Reserve Bank of New York used a competitive process to sell off the remaining $6.0 billion of securities in the Maiden Lane II portfolio to Credit Suisse Securities. The New York Fed said the move will result in full repayment of the $19.5 billion loan it extended to ML II and generate a net gain for the U.S. taxpayer of about $2.8 billion, including $580 million in accrued interest on the loan...

MBS investors continue to sweat over the impact of the $25 billion multistate servicing settlement, especially regarding potential conflicts of interest when banks own a second mortgage while servicing a securitized first lien. “The minimum requirement is that every time you modify a first lien, you have to modify the second lien to the same degree, or you have to write off the second lien entirely,” explained Shaun Donovan, secretary of Housing and Urban Development, at a housing conference earlier this week. Donovan characterized the treatment of home-equity loans in the settlement as a positive...

Department of Housing and Urban Development Secretary Shaun Donovan told lawmakers this week that the Obama administration was “encouraged” by the early activity in the revamped Home Affordable Refinance Program. And he was bullish on the prospects of HARP 2.0 picking up more volume as the program becomes fully operational by the end of this month. But available data and a new analysis by Inside MBS & ABS suggest that HARP 2.0 is not likely to generate much, if any, more volume over the next two years than HARP 1.0 did over the past three years. In fact, that was the Federal Housing Finance Agency’s...

Commercial banks increased their stake in the residential MBS market to a record $1.360 trillion as of the end of 2011, with a lot of the growth coming in Ginnie Mae MBS. Bank MBS holdings rose 2.4 percent from the third to the fourth quarter as seven of the 10 largest bank MBS investors reported significant increases. Compared to the end of 2010, bank MBS holdings were up 10.3 percent over a period in which the outstanding supply of single-family MBS continued to decline. Commercial banks held a record 20.9 percent of outstanding residential MBS at the end of last year, based...(Includes two data charts)