Insurance companies will likely increase their investment in non-agency residential MBS, with market and regulatory influences encouraging movement toward hybrid and floating-rate securities as opposed to fixed-rate bonds, according to some top securities industry analysts. The primary driver on the regulatory level is the anticipated slight rise in capital requirements expected to result from a recent action by the National Association of Insurance Commissioners, the association of state insurance regulators. On Dec. 27, 2011, the NAIC released updated pricing designations that...

Principal reduction to ease negative equity situations may have a lot of positive effects for homeowners, but recent research suggests it may have little impact on worker mobility. A forthcoming working paper by Sam Schulhofer-Wohl, of the Federal Reserve Bank of Minneapolis, contends that research showing underwater borrowers are 33 percent less likely to move to better employment markets is flawed because it ignores key data. In an analysis of Census Bureau housing data, Schulhofer-Wohl reached the opposite conclusion, that underwater borrowers are more likely to move, suggesting that principal...

Well-known jumbo originators contributed most of the collateral for Redwood Trust’s pending $415.73 million non-agency mortgage-backed security, but a handful of smaller lenders also benefitted from Redwood’s jumbo correspondent program. These lenders have little securitization experience but received strong endorsements from rating services and due-diligence firms. Redwood purchased most of the loans to be included in Sequoia Mortgage Trust 2012-1 on a flow basis, according to Kroll Bond Rating Agency. Flagstar Bank led the smaller originators, with $31.84 million of its loans included in the security ...

Analysts are divided regarding the outlook for Ocwen Financial as the special servicer has grown significantly in the past two years. Fitch Ratings and Moody’s Investors Service recently downgraded Ocwen and Saxon Mortgage due to concerns about Ocwen’s growth strategy and financial standing while others have endorsed Ocwen and its practices. Ocwen handled a $106.1 billion portfolio at the end of the third quarter of 2011, including $74.9 billion in subprime mortgages. The total included some of the $38.6 billion in subprime loans the servicer acquired from Litton Loan Servicing. At the beginning of February, the company is set to close acquisitions of the Saxon platform and its $26.6 billion portfolio as well as $15.0 billion in non-prime mortgage servicing rights from ...

Nationstar Mortgage’s servicing portfolio has grown significantly in the past year due to acquisitions from banks, a trend the company’s officials suggest will continue. “There is significant room for market penetration as larger banks dispose of servicing assets,” the nonbank servicer said in a recent presentation to investors. Nationstar is touting its growth prospects even after increasing its servicing portfolio to $102.7 billion at the end of the third quarter of 2011 from $12.7 billion at the end of 2007. The company owns 49.2 percent of the holdings, with the rest being subserviced for others ...

Carrington Holding Company this week announced a partnership with Oaktree Capital Management to purchase up to $450 million in real estate-owned properties and offer them as rentals. The plan is not specific to loans owned by the government-sponsored enterprises, according to Carrington officials. “Whether this inventory comes from the GSEs, banks or directly from the [multiple listing service] isn’t a primary concern at the moment,” said Rick Sharga, an executive vice president at Carrington Mortgage. “We’ll put together the portfolio based on properties that meet the criteria we’ve established to ensure a reasonable return for the investors.” ...

Total FHA forward mortgage originations fell to $190.3 million in 2011, a 32.8 percent decline from 2010 even as mounting FHA delinquencies continue to raise concerns of a costly taxpayer bailout. Five lenders accounted for a fourth of total production with a combined $48.2 billion and an aggregate market share of 25.3 percent, according to Inside FHA Lending’s 2011 ranking and analysis of top FHA lenders. The data do not include FHA reverse mortgages. However, the total output of the top five declined on a quarterly and yearly basis by 15.6 percent and a hefty 39.0 percent, respectively. Those five elite lenders included ... (includes one chart)

The Department of Housing and Urban Development this week announced new regulations strengthening the process by which it requires errant lenders to indemnify the agency for insurance claims paid on ineligible mortgages. The final rule is the latest in a series of steps HUD says it has undertaken to protect and strengthen the FHA’s Mutual Mortgage Insurance Fund while providing qualified borrowers access to government-backed mortgage financing. The health of the MMI fund has come under scrutiny after a recent independent audit reported further decline in the FHA’s capital reserves for unexpected losses. Testifying before Congress in December, HUD Secretary Shaun Donovan discussed ...

Congress should repeal legislation raising the FHA’s maximum loan limit before the agency’s losses skyrocket, triggering a massive taxpayer bailout, warned the American Enterprise Institute. In a new research paper, Peter Wallison and Edward Pinto, resident fellows at the AEI, urged Congress to correct its mistake of restoring the pre-Oct. 1 temporary maximum loan limits of $729,750 for FHA while leaving Fannie Mae and Freddie Mac at the lower “permanent” high-cost loan limit of $625,500 set by Congress in 2008. “Congress should bite the bullet – recognize the losses that are already embedded in the FHA’s insurance fund and adopt reforms to the agency’s accounting and underwriting that will stop the bleeding,” the two public policy analysts said. Last fall, the FHA came under fire from Republicans and conservatives after an independent actuarial review of the agency’s Mutual Mortgage Insurance Fund found ...

Fewer mortgage lenders were terminated in 2011 through the FHA Credit Watch Termination Initiative than in the preceding three years. According to the Department of Housing and Urban Development’s 2011 Credit Watch termination list, only 20 approved lenders lost their authority to originate and underwrite FHA loans. The number was way down from 2010, when a record 122 mortgagees had their origination approval agreements with HUD and the FHA ended. Poor performance of FHA-insured loans originated by the mortgagee results in a termination. Specifically, an agreement with a lender may be terminated if ... (includes one chart)