The dismissal of a lawsuit from non-agency MBS investors against the rating services was confirmed last week, including a ruling that ratings from Fitch Ratings, Moody’s Investors Service and Standard & Poor’s were not negligent misrepresentations. The U.S. Court of Appeals for the Sixth Circuit confirmed the September 2011 dismissal of a lawsuit brought by investors led by the Ohio Police & Fire Pension Fund. The lawsuit related to 308 AAA-rated non-agency MBS issued between 2005 and 2008, with the investors taking losses of $457 million from the securities. The investors claimed...

Mortgage securitization rates remained at record levels through the third quarter of 2012, with 86.3 percent of primary market originations being financed as MBS, according to a new analysis by Inside MBS & ABS. A total of $1.15 trillion of MBS backed by recently originated loans were issued through the first nine months of the year, soaking up most of the $1.33 trillion in new production during that period. The market is on track to top the record 84.4 percent securitization rate set for the full year back in 2009, after two years in which the rate had drifted somewhat lower. During the third quarter, the securitization rate surged...[Includes one data chart]

The Division of Swap Dealer and Intermediary Oversight of the Commodity Futures Trading Commission has issued an interpretation clarifying commodity pool treatment for certain securitizations and a no-action letter providing additional relief for certain legacy securitization entities. Specifically, the letter explains when exclusion from commodity pool regulation for certain securitization vehicles that do not meet any of the criteria set forth in an October 2012 no-action letter is appropriate. It also provides relief for certain securitization vehicles formed before Oct. 12, 2012. In the October no-action letter, the CFTC spelled out...

Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act will carry two key “unintended consequences” for the structured finance industry should it be implemented in its current form, a trade group representative warned lawmakers this week. Testifying before the House Financial Services Subcommittee on Capital Markets and Government-Sponsored Enterprises, American Securitization Forum Executive Director Tom Deutsch said that Title VII’s treatment of commodity pools and margin requirements triggers two potential “compliance challenges” for some parties in securitization transactions that may hurt all of the beneficiaries of the deal. “We would not have expected...

Two separate white papers from industry trade groups on reform of the government-sponsored enterprises call for a strong government role to provide stability and liquidity in multifamily mortgage finance. The Mortgage Bankers Association called for a system of private capital finance for multifamily housing, with a focus primarily on securitization and the federal government serving as a catastrophic insurer. The program would be funded through risk-based premiums paid by the entities that securitize the loans, according to Brian Stoffers, president of CBRE Debt and Equity Finance. “We recognize...

Analysts expect the U.S. economic recovery to continue on a slow, weak path into 2013 with the potential for a new recession that could weaken the residential MBS market. At Standard & Poor’s, analysts predict a “slow and uneven” economic recovery with a 15 percent to 20 percent chance of another recession that would be less severe than the 2008-2009 financial crisis but potent enough to sap the MBS market. S&P assumes a reversal in home prices and unemployment rising to near 9 percent in 2013, which could hamper borrower capacity to make their mortgage payments. Overall, S&P’s outlook for the single-family MBS market is...

Fannie Mae and Freddie Mac mortgage-backed securities remained the preferred investment choice of the 12 Federal Home Loan Banks during the third quarter of 2012, with a slight decrease from the previous quarter, according to a new analysis and ranking by Inside The GSEs based on data from the Federal Housing Finance Agency. Meanwhile, Ginnie Mae securities posted a modest increase within the FHLBank system during the period ending Sept. 30, 2012.

Industry groups are lukewarm but supportive overall of the Federal Housing Finance Agency’s efforts to modernize Fannie Mae’s and Freddie Mac’s securitization process but they remain concerned about changing servicing models, according to comment letters submitted to the agency. In September, the FHFA in a white paper proposed a framework for both a common securitization platform and a model pooling and servicing agreement with a request for public comment. The proposed infrastructure has “two complementary goals” – to replace the outmoded proprietary infrastructures of the GSEs with a common, more efficient model and to establish a framework that’s consistent with multiple states of housing finance reform, including greater participation of private capital in assuming credit risk.

The Mortgage Bankers Association said it largely supports accounting changes that would impact holdings of mortgage-backed securities. Under a proposal by the Financial Accounting Standards Board, there would be no change in measurement for reporting entities that carry certain assets and liabilities at amortized cost. The MBA said the update proposed by FASB in October would require certain changes to the measurement of assets and liabilities of securitizations that a reporting entity is required ...

As part of negotiations regarding the fiscal cliff, the Obama administration and Democrats in the House are seeking principal reduction loan modifications for borrowers with negative equity. The Treasury Department has reportedly proposed a program targeting borrowers with mortgages in non-agency mortgage-backed securities while the debate about principal forgiveness for loans held by the government-sponsored enterprises has also been rekindled. The Obama administration would neither confirm nor deny the non-agency proposal, but details regarding the Market Rate Modification program have prompted talk among industry participants and a detailed analysis. “In order to assist...