Deutsche Bank AG has settled a class action suit with disgruntled MBS investors for $32.5 million, after plaintiffs argued that they received “false and misleading” information regarding their investment. The securities were pass-through Alt A MBS issued by Deutsche between May 2006 and May 2007, which were subsequently downgraded and “are no longer marketable at prices anywhere near the price paid by plaintiffs and the class,” said an amended complaint. The class action, filed in 2008 by unions Massachusetts Bricklayers and Masons Trust Funds, the Pipefitters’ Retirement Fund Local 597...

Residential MBS investors should expect loans in states that require judicial review for every foreclosure to incur greater costs as they make their way through the foreclosure process, according to a new Moody’s Investors Service report. The rating agency’s fourth quarter 2011 Servicer Dashboard found that the average days in foreclosure at year-end 2011 stood at 654 days in judicial states and 297 days in non-judicial states with further increases in the foreclosure timelines expected. Of the six banks the Moody’s report observes – Bank of America, Chase, Citi, GMAC, Ocwen and Wells Fargo – the...

After suggesting that it would consider selling jumbos to investors via whole loan sales, Redwood Trust this week issued a $327.94 million non-agency jumbo mortgage-backed security. While the real estate investment trust has not ruled out whole loan sales, the issuance reflects confidence in the non-agency market – from Redwood and investors. Redwood’s latest security, Sequoia Mortgage Trust 2012-2, is similar to other recent non-agency MBS issuance by the REIT. Redwood has now issued five non-agency MBS deals since April 2010, the only non-agency MBS issuance backed by new originations since 2008. At the end of February, Redwood officials revealed that the REIT was considering bulk sales ...

The Securities and Exchange Commission and Wells Fargo are in a dispute regarding due diligence reports relating to almost $60.0 billion in non-agency mortgage-backed securities issued by Wells between September 2006 and early 2008. The SEC last week filed a subpoena enforcement action against Wells for failure to produce documents. The bank disputes the SEC’s account. The SEC said it has been seeking the documents since September. The regulator claimed that Wells agreed to produce the documents but has failed to do so. The SEC said its action relates to its investigation into whether Wells made material misrepresentations or omitted material facts on certain non-agency MBS issued by the bank ...

Iowa Attorney General Tom Miller downplayed concerns raised by investors in non-agency mortgage-backed securities regarding the pending $25.0 billion servicing settlement. “The current set of concerns aren’t particularly warranted,” he said this week during a webinar hosted by Inside Mortgage Finance Publications. The Association of Mortgage Investors has asked for a number of changes to the settlement, including a cap on the amount of principal reduction that can be completed on non-agency MBS to meet the participating servicers’ loss mitigation requirements. Miller said the AMI is the only group he is aware of that might challenge approval of the settlement by the U.S. District Court for the District of Columbia. “I think that their concerns are not going to be realized ...

Prudential Financial this week issued a $1.0 billion bond to sell vintage subprime mortgage-backed securities. Analysts described the bond as a hybrid between an MBS and a covered bond. Standard & Poor’s gave Prudential Covered Trust 2012-1 an A rating, which was based on the rating of Prudential, not of the subprime MBS being sold. The bond was sold as a private placement and Prudential has not commented on the sale. However, in its recently released annual report for 2011, Prudential said it had transferred some of its subprime MBS holdings ...

PennyMac Loan Services has some unique loss-mitigation strategies, but Moody’s Investors Service warned this week that some of the company’s approaches are risky. Among other issues, PLS can require borrowers that otherwise would not qualify for a loan modification to deed their property to the servicer if the mod does not succeed. “While this approach can improve loss mitigation performance or reduce timelines, Moody’s believes these programs could result in borrowers and regulators challenging this practice as well as headline risk to the company,” the rating service said. PLS has yet to employ the tactic. The warning from Moody’s ...

The Treasury Department this week finished winding down its holdings of Fannie Mae and Freddie Mac MBS, claiming a positive return of $25 billion for the U.S. taxpayers from a market stabilization initiative launched in the teeth of the 2008 financial market meltdown. Treasury’s holdings of MBS issued by the two government-sponsored enterprises peaked at $197.6 billion in December 2009. “These MBS purchases helped preserve access to mortgage credit during a period of unprecedented market stress,” the agency said. The Federal Reserve agency MBS investment program was far bigger, peaking at $1.12...

An estimated 82.8 percent of single-family mortgages originated in 2011 ended up being financed through securitization, according to a new Inside MBS & ABS analysis. That’s the second highest level on record, falling slightly below the 84.4 percent securitization rate in 2009. Virtually all government-insured mortgages are securitized through the Ginnie Mae program, which securitized some $284.6 billion in newly originated FHA and VA loans last year. The big increase in securitization rate came in the conventional conforming market, where high loan limits have greatly expanded (Includes one data chart)...

Last week, the 2nd Circuit Court of Appeals ruled that Judge Jed Rakoff of the District Court for the Southern District of New York erred when he blocked the $285 million agreement the Securities and Exchange Commission and Citigroup struck to settle a dispute over MBS that later turned toxic when the market tanked. Market observers think it likely means the settlement is back on track, and a good sign for the market, “with sanity and certainty prevailing,” as one put it. In U.S. Securities & Exchange Commission v. Citigroup Global Markets Inc., the district court this past November refused to approve a...