Non-agency mortgage-backed security investors and politicians on both sides of the aisle were critical this week of the recent $25.0 billion servicing settlement. The settlement requires principal reduction loan modifications on mortgages held in five banks’ portfolios and allows the servicers to receive credit for reducing principal on mortgages in non-agency MBS. Vincent Fiorillo, a trading/portfolio manager at Doubleline Capital, noted that the Association of Mortgage Investors is not opposed to principal reduction mods ...

Walter Investment Management is scheduled next week to begin subservicing the first batch of up to 30,000 mortgages in non-agency mortgage-backed securities for Bank of America. The transfer will mark the latest shift from BofA to subservicers as part of a still-disputed $8.5 billion proposed settlement with non-agency MBS investors. Nine subservicers were approved as part of the settlement: Acqura Loan Services, Bayview Loan Servicing, FCI Lender Services, Nationstar Mortgage, Residential Credit Solutions ...

Moody’s Investors Service announced last week that it is reviewing $47.5 billion in outstanding non-agency mortgage-backed securities for possible rating action. In a change of pace, however, most of the securities are being reviewed for potential upgrades. A whopping 78.3 percent of the combined subprime, Alt A, option ARM and jumbo MBS in question could potentially be upgraded. “The upgrade reviews are due to significant improvement in collateral performance and/or faster-than-expected pay-down on ...

If investors in non-agency mortgage-backed securities had easy access to the addresses of mortgages included in non-agency MBS, the sector’s market share would increase, according to a new proposal by the Reason Foundation, which promotes libertarian principles. “Ignorance of the borrower’s address and identity is a major disadvantage for the residential MBS investor or anyone trying to analyze residential MBS deals,” according to Marc Joffe, a research associate at the Reason Foundation and Anthony Randazzo ...

Making the Department of Veterans Affairs’ adjustable-rate mortgage programs permanent would cost $144 million in new direct taxpayer subsidies over the next 10 years, according to Congressional Budget Office estimates. Based on the number of ARM and hybrid ARM loans the VA has guaranteed in recent years, CBO estimates that the VA would guarantee approximately $1.3 billion worth of additional loans annually over the next 10 years. Consequently, additional subsidy costs for those loans would increase direct spending by $52 million over 2012-2017 and $144 million over 2012-2022, the CBO said. Subsidy costs of those additional loan guarantees would be paid from a ...

A proposal to replace the FHA’s current Tier Ranking System with a Servicer Performance Scorecard as a basis for determining servicer incentive payment is expected to be published in the Federal Register by the end of this month. In the previous issue of Inside FHA Lending (Volume 5, Issue 11, May 25), it was reported that a coalition of industry groups asked the FHA to adopt a private transfer fee rule in harmony with the final rule recently adopted by the Federal Housing Finance Agency. In a recent seller/servicer bulletin, Freddie Mac announced that, effective July 16, it will not purchase mortgages that are ...

Fannie Mae and Freddie Mac mortgage-backed securities remained the preferred investment choice of the 12 Federal Home Loan Banks during the first quarter of 2012, with a modest increase 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 decline within the FHLBank system during the first three months of the year. GSE MBS accounted for 70.7 percent of combined FHLBank MBS portfolios, up 2.3 percent from the fourth quarter of 2011. The Finance Agency’s data do not separately break out Fannie and Freddie volume or share.

Home Loan Servicing Solutions, recently launched as an independent acquirer of high quality mortgage servicing assets from Ocwen Financial Corp., is off to a good start as analysts gave it a thumbs up after a promising first-quarter debut. Analysts with Keefe, Bruyette & Woods gave the new company an Outperform rating and projected upward-trending dividend yields of 8.2 percent in 2012 and 9.9 percent in 2013-14. On May 8, the company declared a 10-cent monthly dividend, and the 30-cent quarterly dividend is slightly below KBW’s estimate of quarterly earnings-per-share of 32 cents...

Thanks to the ongoing domination of the MBS market by Fannie Mae, Freddie Mac and Ginnie Mae, securitization continued to fund the overwhelming majority of home loans originated during the first three months of 2012. A new Inside MBS & ABS analysis revealed that the volume of securitized newly-originated residential mortgages equaled a whopping 97.0 percent of home loans originated during the first quarter of this year. That came close to the record 99.7 percent securitization rate set back in the first quarter of last year. The delay between primary market origination...(Includes one data chart)

Last week’s launch of the RMBS Working Group’s website demonstrated that government investigators see Wall Street insiders as a valuable source of information to detect and prove fraud and other misconduct in the packaging of mortgage securities. “Fraud can be hard to uncover without help from whistleblowers who were corporate insiders,” the task force said on the website. Whistleblowers can get rewards of up to 30 percent of the government’s monetary recovery based on the specific information, as well as protection from retaliation. The inclusion of a whistleblower provision in the Dodd-Frank Act has...