Significant declines in jumbo mortgage-backed security prices tracked by the PrimeX index in recent weeks were due to investor panic, not collateral fundamentals, according to industry analysts. The sell-off began earlier this month after Fitch Ratings downgraded a number of jumbo securities and warned of negative equity, prompting fears of strategic defaults. Prices on the usually steady PrimeX index fell by as much as 10.0 percent from the beginning of October. Some of the sub-indices even fell below par for the first time. ... [includes one data chart]

In a somewhat unusual announcement last week, Walter Investment Management said it was servicing approximately 910,000 loans representing approximately $59.0 billion of unpaid principal balance as of the end of the third quarter of 2011. The announcement was unusual because that was the extent of the statement. “We believe the major increase in the servicing portfolio could be due to Walter being allocated a portion of the servicing rights related to the Fannie Mae/Bank of America deal, whereby Bank of America sold the servicing rights to 400,000 loans to Fannie Mae,” said analysts at FBR Capital Markets. ...

Bexil American Mortgage, a newly formed originator, plans to originate non-agency mortgages and sell them to Citi, Wells Fargo and PennyMac. John Robbins, president of Bexil American Mortgage, said the stagnant non-agency securitization market has not completely stopped sales of jumbo mortgages. “There are active investors for those products today,” he said last week on a call with investors. ...

The performance of large mortgage servicers of non-agency residential MBS, including their ability to prevent or cure loan delinquencies, varied widely during the 12 months ending in June 2011, due in no small part to foreclosure moratoria imposed on some, but not all, servicers, according to Moody’s Investors Service. The company’s inaugural Servicer Dashboard report found that during the June 2010 to June 2011 period, JPMorgan Chase and Bank of America exhibited overall poor servicing performance in contrast to CitiMortgage, GMAC and Ocwen. A major impediment to Chase and BofA’s servicing performance, Moody’s noted, was the fact that...

Last week, GMAC Mortgage announced implementation of the Responsible Homeowner Reward Program to provide monetary incentives to underwater VA loan borrowers who continue making payments on their loans. The RHRP was designed by the Loan Value Group as a way to address negative equity without necessitating additional documents or new underwriting. Homeowners build up their reward each month for a fixed period of time, so long as they are current. The size of the reward is consistent with the negative equity and severity of the loan. If the borrowers meet all of the payment milestones on time, GMAC Mortgage will...

Flood insurance reform legislation in the Senate would result in higher net income to the National Flood Insurance Program and more federal revenues than the House version, according to a cost estimate by the Congressional Budget Office. The Senate Committee on Banking, Housing and Urban Affairs approved the bill, the Flood Insurance Reform and Modernization Act, on Sept. 8 by unanimous voice vote. The bill is awaiting Senate floor action. The House passed its bill, H.R. 1309, the Flood Insurance Reform Act of 2011, before the August recess by a vote of 406-22. Like its House counterpart, the Senate bill would reauthorize...

MetLife announced last week that it wants to sell its mortgage banking business, but regulatory and legal issues that are partly driving the firm’s retreat may also make it hard to find a buyer. Nowadays, starting from scratch may make more sense than buying someone else’s problems. MetLife explained in a press release that the decision was prompted by an “uncertain marketplace and regulatory environment [that requires] a tremendous amount of resources – both in terms of people and capital – to effectively compete in and profitably grow the forward mortgage business. Doing so would divert these resources away from...

Long-term investor involvement is the industry’s best bet and “only realistic alternative” to boost housing demand and allow government housing agencies to meaningfully discharge their backlog of real estate owned properties, according to a report by Amherst Securities Group. However, Amherst notes that private investors will require more financing options and better access to bulk portfolios of homes, perhaps through a government program, in order to absorb and convert dormant distressed properties into active, income-producing rentals. “The massive housing market overhang is a clear danger to the U.S. economy – it creates...

The U.S. Supreme Court recently agreed to review a dispute over closing fees in a move that may resolve a potentially entrenched circuit court conflict over the scope of the Real Estate Settlement Practices Act prohibition against unearned fees. At issue is RESPA Section 8(b), which provides that “[n]o person shall give and no person shall accept any portion, split or percentage of any charge made or received for the rendering of a real estate settlement service in connection with a transaction involving a federally related mortgage loan other than for services actually performed.” As the U.S. government...

Mortgage servicing shops should soon expect extra-special scrutiny from the Consumer Financial Protection Bureau and perhaps even a visit by bureau examiners as part of a servicer supervision strategy announced late last week. “Mortgage servicing has a huge impact on consumers and is a priority for the CFPB,” said Raj Date, special advisor to the Secretary of the Treasury for the CFPB. “The mortgage servicing market has been bogged down by widespread reports of pervasive and profound consumer protection problems. We are going to take a close and measured look at whether servicers are following the law.” The CFPB has indicated that...