Non-agency mortgage-backed security investors strongly oppose a proposal in California to reduce principal for borrowers with negative equity by acquiring mortgages via eminent domain. The proposal could set a troubling precedent according to non-agency MBS investors, who are still considering options to prevent such seizures. In June, San Bernardino County along with two cities in the county, Ontario and Fontana, approved a resolution that would allow the municipalities to acquire mortgages with negative equity using eminent domain ...

Subprime mortgage-backed securities offer returns of at least 10.0 percent per year for selective investors, according to Bill Roth, co-CIO at Two Harbors Investment. “We are able to assume the default of a significant portion of borrowers who are currently making their payments, assume a declining housing market and still be able to earn an attractive yield,” Roth said last week during a webinar hosted by the real estate investment trust. He added that home prices could decline by another 20 percent in the next year and ...

Compensation for non-agency mortgage-backed security servicers should be adjusted and the industry should adopt practices from commercial MBS servicing, according to Morningstar Credit Ratings. The firm that recently established its non-agency MBS rating capabilities said enhanced servicing could help revive the issuance of non-agency MBS. “Without these reforms it may prove very difficult to attract investors back into the fold of private-label residential mortgage securities given the weaknesses exposed in ...

Default risk on non-agency jumbo mortgage-backed securities continues to improve gradually, according to economic risk factors applied to Fitch Ratings’ non-agency jumbo MBS loan loss model. The rating service released the economic risk factors for the second quarter of 2012 last week. Fitch said the improvement is tied to home price trends and it expects home prices to “touch bottom” in 2013. New Jersey and New York have the highest default risk in the country, with expected defaults well above ... [Includes three briefs]

Given the features of the enhanced FHA streamline refinancing product, investors will be focusing on the FHA low mortgage-insurance premium (MIP) pools in the coming months, according to analysts with Barclays Research. Barclay’s analysts estimate that 27 percent of outstanding Ginnie Mae MBS pools are eligible for streamline refinancing, which could translate to $36 billion in new annual Ginnie Mae issuance. Approximately $293.0 billion of Ginnie Mae’s $1 trillion-plus 30-year loan pools were originated before May 2009, analysts said. About 79 percent of the collateral underlying the pools are ...

HUD FY 2013 Budget. On June 29, the House approved the Department of Housing and Urban Development’s FY 2013 budget. Although a number of amendments was considered, the funding levels for HUD programs remained unchanged from those passed by the House Appropriations Committee. New commitments under the FHA’s Mutual Mortgage Insurance Fund in FY 2013 include $400 million for loan guarantees and $50 million for direct loans. The General and Special Risk Program gets $25 billion for guaranteed loans and $20 million for direct loans. A total of $500 billion for the Ginnie Mae securitization program would be available until ...

The Securities and Exchange Commission is coming down the home stretch in a project that has raised jitters in the MBS and ABS market: a review of the credit rating process for structured finance transactions that will conclude with reform recommendations for Congress. Embedded in the Dodd-Frank Act was a provision authored by Sen. Al Franken, D-MN, that requires the SEC to study potential conflicts of interest in issuer-pay and subscriber-pay compensation models used in the credit rating process. Franken originally proposed that the SEC be required to create a process through which a new government entity would assign...

Relatively few repurchase demands on mortgage loans backing non-agency MBS were resolved during the first quarter of 2012, according to a new Inside MBS & ABS analysis of disclosure filings made by 34 securitizers. The securitizers reported that a total of $29.03 billion of loans were in some stage of the process following demands that the mortgages be repurchased because of breaches of representations and warranties by the originator of the loans. But of that amount, some $28.62 billion – 98.6 percent of total activity – were classified...(includes one data chart)

Roughly 27 percent of outstanding Ginnie Mae MBS pools are eligible for the FHA’s revised streamline refinancing program, which could translate to $36 billion in new annual Ginnie Mae issuance, according to a report from Barclays Research. Barclays analysts estimated that about $293.0 billion of Ginnie Mae’s $1 trillion-plus 30-year loan pools were originated before May 2009. About 79 percent of the collateral backing these pools are FHA loans, which suggests that as much as $232.0 billion could qualify...

When it comes to modifying non-agency mortgages, early loan modifications greatly increase the rate of success, and principal reductions are the most effective type of loan mod, according to a new study by the MBS strategy group at Amherst Securities Group. “Modification activity has undergone a dramatic reshaping over the past few years, which has dramatically improved modification success,” the study said. “In particular, payment reductions are much larger now, and that is...