The United States just concluded an electoral campaign season that involved the expenditure of billions of dollars and resulted in no change in the balance of power on the federal level, beyond strengthening Democrats’ control in the U.S. Senate. But that doesn’t mean nothing important is going to happen over the next four years. Securitization industry officials, Washington insiders, political observers and policy wonks all expect hard financial realities to compel policymakers into responding to a host of issues that will significantly affect housing finance and securitization. “We don’t think the ‘status-quo election,’ as some have called it, means status quo for residential mortgage finance,” said Karen Shaw Petrou, a managing partner at Federal Financial Analytics, a Washington, DC, think tank. She thinks...

Delinquencies on non-agency MBS will likely increase temporarily due to Hurricane Sandy, according to industry analysts, but long-term losses due to the storm are expected to be minimal. Insurance will play a key factor in overall losses, and estimates vary significantly on the extent of coverage in the affected areas. Moody’s Investors Service projected this week that non-agency MBS are unlikely to suffer material losses due to Sandy even though the affiliated Moody’s Analytics estimated the damage to residential housing from the storm will hit $10.5 billion. “Even if damages exceed...

Fannie Mae and Freddie Mac continued to trim their retained holdings of MBS and unsecuritized mortgages during the third quarter, but at a slower pace than in previous periods, according to an analysis by Inside MBS & ABS of earnings reports released this week by the two government-sponsored enterprises. One of the conditions of the conservatorships the GSEs entered four years ago was that they would reduce their retained mortgage portfolios by 10 percent a year. Those terms were revised in August to include a 15 percent annual wind-down, which would take each GSE’s investment portfolio down to $250 billion by the beginning of 2018, four years sooner than under the previous arrangement. As Freddie noted...[Includes one data chart]

Redwood Trust late last week reported net income of $40.0 million for the third quarter of 2012, including $3.0 million in net gains on the $372.0 million of non-agency MBS issuance and whole loan sales the real estate investment trust completed during the period. Redwood officials said the company is well-positioned for growth in non-agency MBS issuance, commercial MBS issuance and soon agency origination activity. In a quarterly review, company officials noted that some have called the REIT “crazy” for resuming issuance of non-agency MBS after the financial crisis of 2007. Redwood has issued eight non-agency MBS since April 2010 totaling $2.6 billion. The REIT said...

A task force of state insurance regulators has agreed to require insurers to set aside additional capital to cover risks tied to residential and commercial MBS in an effort to buffer the industry from losses in the event of a severe downturn. The National Association of Insurance Commissioners’ Valuation of Securities Task Force voted 11-2 to support a proposed increase in the NAIC’s capital requirements for U.S. life insurers. The change in capital requirements is driven by year-end NAIC modeling assumptions related to RMBS and CMBS. The change raises...

The ACLU is calling for changes to federal anti-discrimination statutes to deter secondary mortgage market participants from engaging in business practices that might have a discriminatory impact on certain protected classes of borrowers. In a recent analysis of mortgage foreclosures, the ACLU said the origination and securitization of subprime and other high-risk mortgage products have hurt minority families and caused the loss of 3.5 million homes to foreclosure. The ACLU believes...

“The return of non-agency MBS for prime loans is a lot further along than market observers might think,” officials at Redwood Trust said last week. The company said its goal is to issue $900 million or more in non-agency MBS each quarter within the next 12-to-18 months and eventually finance mortgages for prime borrowers “who do not fit into today’s tight credit box.” Through 10 months in 2012, Redwood averaged $498.31 million in quarterly non-agency MBS issuance, according to the Inside Mortgage Finance ...

The Securities and Exchange Commission has been quietly meeting with investors in non-agency mortgage-backed securities looking for leads to bring regulatory actions. Reaction from investors to the SEC’s outreach has been decidedly mixed, though Reid Muoio, a deputy for the SEC’s structured and new products unit, said the SEC is working to improve regulation on behalf of investors. Speaking at the recent ABS East conference sponsored by Information Management Network in Miami, Muoio detailed an SEC outreach program that was apparently previously undisclosed. He said that a ...

Investors interested in buying new non-agency mortgage-backed securities suggest that the wide variety seen in the pooling and servicing agreements and reporting of vintage non-agency MBS is insufficient. Many investors at the recent ABS East conference in Miami sponsored by Information Management Network called for standardization. “Investors clearly welcome standardization,” said Dapeng Hu, a managing director at BlackRock, which manages more than $150.0 billion in MBS investments ...

Underwriting standards for subprime mortgages and borrower demand for such loans remained unchanged in the third quarter of 2012 compared with the previous quarter, according to the Federal Reserve’s senior loan-officer opinion survey on bank lending practices. While 64 banks surveyed reported offering prime mortgages, only four reported offering subprime mortgages and 23 reported offering nontraditional mortgages. Underwriting and demand for nontraditional mortgages ... [Includes two briefs]