Redwood Trust offered no surprises in its fourth jumbo MBS of the year, a $313.2 million deal that closely resembles the six previous transactions the firm has issued since pioneering the rebirth of the non-agency market back in 2010. With squeaky clean collateral and an investor-friendly securitization structure, Sequoia Mortgage Trust 2012-4 includes three triple-A classes totaling $290.4 million that will be supported by 7.30 percent credit enhancement. That’s the same level as in Redwood’s previous deal, significantly lower than the 8.25 percent enhancement on its first 2012 transaction and slightly above the 7.15 percent level on its second deal this year. In several areas, the latest Redwood MBS includes...

The mortgage securitization rate through the first half of 2012 was down a few ticks from the record level reached in the first quarter of the year, but the market remained dominated by lending for Fannie Mae, Freddie Mac and Ginnie Mae MBS programs. A huge 91.5 percent of new mortgage originations were financed through the agency MBS programs during the first half of 2012, according to a new Inside MBS & ABS analysis. That’s down from the 95.8 percent securitization rate achieved in the first quarter, but it’s comfortably ahead of the securitization rates posted since the financial crisis of 2008. The sky-high securitization rate is partly due...[Includes one data chart]

A ranking Republican on the House Financial Services Committee this week gave notice that GOP lawmakers will be looking to rein in the Federal Reserve’s “radical” and unfettered influence and authority over the nation’s financial system during the 113th Congress next year. Rep. Scott Garrett, R-NJ, chairman of the House Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises, outlined his two top priorities for Congress in 2013 just as the Federal Open Market Committee announced plans to add about $40 billion a month to its massive agency MBS portfolio. Garrett said the committee’s first priority will be...

Uncertainty about risk in a rapidly changing regulatory environment and the still destabilized economics of the housing market continue to keep private capital from returning to the mortgage market, according to industry officials at this week’s American Mortgage Conference sponsored by the North Carolina Bankers Association. “Everybody’s very concerned about the role of the government, that the government is supporting too much of the marketplace today,” said Meg Burns, senior associate director for housing and regulatory policy for the Federal Housing Finance Agency. “But it’s really hard to envision how people can pull back from that government support when we don’t actually understand not only who holds the credit risk but what the requirements are for retaining that risk in terms of capital.” All of the Dodd-Frank Act regulations that are still in play are...

Excess servicing spreads qualify as real-estate related investments for real estate investment trusts, according to a new ruling by the IRS. The private-letter ruling issued in August allows an un-named REIT to invest in the assets, with others exploring the possibility, according to industry analysts. “In anticipation of new financial industry regulations and in order to improve their liquidity and capital positions, many servicers have begun selling their excess servicing spreads to passive ...

Following the collapse of the non-agency market, critics of banks have suggested that MBS issuers could be liable for significant tax payments due to violations of real estate mortgage investment conduit rules. However, the IRS has yet to act on the issue and officials at the IRS downplayed suggestions of a wide-scale investigation. REMICs receive tax advantages as passive, static investments. The IRS requires that mortgages be transferred to the trust within a certain timeframe, usually within 90 days after the trust is created. Some have suggested that the improper assignment of mortgages to REMICs is...

The Federal Housing Finance Agency is pushing its own version of mortgage reform: an ambitious agenda of standardizing Fannie Mae and Freddie Mac securitization operations to the point that their MBS are interchangeable. The plan, hatched in the absence of any substantial move by Congress or the Obama administration to address the nearly four-year-old conservatorships of the government-sponsored enterprises, has won broad endorsement from the lending and securitization industries. But some analysts say the FHFA strategy will make things worse, not better. Karen Shaw Petrou, managing partner of Federal Financial Analytics, a proprietary think-tank in Washington, DC, characterized the idea as “seductive” and “dangerous as all get-out.” First, there’s the issue of whether the two GSEs could be...

The Homeownership Protection Program Joint Powers Authority Board, a partnership between California’s San Bernardino County and two of its local communities, unanimously directed staff to develop a request for proposals that would invite interested parties with any kind of formal plan to assist underwater families in the JPA area to submit those plans for board consideration. The JPA is examining local government solutions to the negative-equity issues many homeowners in the two participating communities of Fontana and Ontario are having, with the goal of keeping families in their homes, reducing defaults and foreclosures, and enhancing the economic health of the communities. “Presently, the board has not received...

The battle over legacy MBS continues to rage in courts across the country as Bank of New York Mellon filed repurchase-related lawsuits against two financial institutions, Massachusetts Mutual was allowed to proceed with its claims against Countrywide, and a federal banking regulator sued major banks for alleged MBS misrepresentations. On Aug. 21, BNY Mellon, in its capacity as trustee for a pool of loans known as GE-WMC Mortgage Securities Trust 2006-1, sued WMC Mortgage and GE Mortgage Holdings for their alleged failure to repurchase approximately $680 million in defective residential mortgages. According to the lawsuit filed in New York state court, a holder of more than 25 percent of the voting rights under the pooling and servicing agreement notified...

Last month’s surprise move by the Treasury Department to revise the preferred stock purchase agreements with Fannie Mae and Freddie Mac definitively settles the question of “when” not “if” the two government-sponsored enterprises are to be wound down but it also removes any remaining sense of urgency to push a legislative solution to GSE reform, according to industry analysts. On Aug. 17, Treasury announced it will require Fannie and Freddie to turn over any profits they earn to the government. Rather than continue to borrow from the Treasury to make a 10 percent dividend payment to the Treasury, the revised PSPA implements a “full income sweep” of GSE profits. Additionally, Treasury’s announcement calls...