Although Fannie Mae and Freddie Mac have begun buying the latest generation of Home Affordable Refinance Program mortgages with loan-to-value ratios exceeding 125 percent, a number of lenders are holding these loans in the pipeline until the government-sponsored enterprises open the spigot on securitization options for these loans. According to the Federal Housing Finance Agency, Fannie and Freddie purchased 1,548 of the high LTV HARP loans in February. FHFA Senior Associate Director Meg Burns said during an Inside Mortgage Finance webinar this week that a similar volume of 125+ LTV loans were...

Fitch Ratings has placed 157 residential MBS classes serviced by Residential Capital on Rating Watch Negative as the ailing subsidiary of Ally Financial slid closer to bankruptcy. The rating action came on the heels of a Fitch downgrade of ResCap’s issuer default rating to ‘C’ from ‘CCC’ on April 18. In addition, Fitch placed GMAC Mortgage’s servicer rating on Rating Watch shortly before the adverse rating action against ResCap. Fitch said the coordinated rating actions reflect the current uncertainty for the servicing portfolio due to the growing possibility of a bankruptcy or debt restructuring for...

Moody’s Investors Service has not rated a non-agency MBS since the end of 2010, but the company has made up for it by taking a lead role in the non-mortgage ABS market, according to a new ranking and analysis by Inside MBS & ABS. Moody’s rated 37 non-mortgage ABS issued during the first quarter of 2012, a total of $33.85 billion in new issuance. That represented 84.5 percent of the market by dollar volume, an increase from the 70.4 percent market share the company garnered for all of 2011. Its deepest penetration was in the business loan category, which includes dealer...(Includes one data chart)

The Securities and Exchange Commission gave a thumbs-up last week to some changes to the rules governing the to-be-announced market proposed by the Financial Industry Regulatory Authority to increase transparency in agency pass-through MBS transactions. The new changes will institute clear requirements for more timely reporting of two subsets of MBS TBA transactions – those that are “for good delivery” (GD) and those that are “not for good delivery” (NGD) – and include some information that has not been publicly disclosed before. The intent of the changes is to improve the ability of investors to...

While the niche structured settlement ABS sector is dominated by one market actor, such deals have little risk and low loss levels, making them appealing investments, Barclays Capital said in a recent report. Structured settlement ABS are often backed by legal agreements in which a defendant agrees to pay a plaintiff in scheduled payments to satisfy the settlement amount, commonly used to settle malpractice, personal injury and product liability suits. In recent years, as lottery winners have a similar option of receiving payments through a timetable, lottery winnings have also been used in structured...

Invesco liquidated its fund in the Public-Private Investment Program this month, earning a strong 18.2 percent cumulative net internal rate of return on $2.3 billion in capital. “The PPIP program has resuscitated the private-label mortgage-backed securities market and, at least in our case, resulted in a handsome profit to the Treasury Department,” said Wilbur Ross, chairman of the Investment Committee of the fund and chairman and CEO of WL Ross & Co. “We are proud to have participated in it.” Among the seven non-agency public-private investment funds that were participating in the PPIP ... [Includes one data chart]

Repurchase requests on mortgages in non-agency mortgage-backed securities increased for major banks during the first quarter of 2012 compared with the end of 2011, according to a new analysis by Inside Nonconforming Markets. However, the lenders have challenged the vast majority of the claims and a significant court decision appears to be heading toward ...

Continuing financial problems at Ally Financial’s Residential Capital have prompted speculation among industry analysts that Ally will agree to sell at least a portion of ResCap’s $10.9 billion legacy portfolio within the next two months. Nationstar Mortgage has been mentioned as a front-runner to acquire ResCap’s non-agency mortgage servicing rights, although other servicers have also considered the acquisition. “In light of ResCap’s liquidity and capital needs combined with volatile conditions in the marketplace, there is substantial doubt about ...

The company formerly known as Option One reached a $28.2 million settlement with the Securities and Exchange Commission this week regarding issuance of subprime mortgage-backed securities in early 2007. The SEC said Option One’s MBS “operated as a fraud or deceit” against non-agency MBS investors. “The offering documents misled investors about Option One’s precarious financial condition and, hence, its inability to fulfill its obligations on its own to repurchase ...

Short sales on mortgages included in non-agency mortgage-backed securities have increased sharply in the past year, as a percentage of total distress property dispositions, according to analysts at Deutsche Bank Securities. The loss mitigation technique is seen as beneficial for borrowers, portfolio servicers and non-agency MBS investors, especially compared with foreclosure costs and timelines. “Short sales typically result in faster resolution and significantly higher principal recovery,” the analysts said. Short sales accounted for about ...