An ongoing Securities and Exchange Commission investigation into possible misconduct related to Wells Fargo’s sale of almost $60 billion in MBS has resulted in the agency filing a subpoena enforcement action in the U.S. District Court for the Northern District of California against the firm. “The commission is investigating possible fraud in connection with Wells Fargo’s sale of nearly $60 billion in residential MBS to investors,” the SEC said. “Pursuant to subpoenas dating back to September 2011, the bank was obligated to produce (and agreed to produce) documents to the...

Redwood Trust has packaged its fourth non-agency jumbo MBS of the past two years and achieved the lowest credit-enhancement requirement during that span thanks largely to a more appealing geographic mix of properties backing the loans. Sequoia Mortgage Trust 2012-2 looks a lot like the three previous jumbo deals Redwood has issued in its solo effort to re-ignite the non-agency MBS market. In some ways, the collateral is slightly less pristine than some of the earlier transactions, although all four have been backed by very high quality prime loans. Credit enhancement for the AAA-rated classes is 7.15...

Commercial banks solidified their status as the biggest investor class in the MBS market over the second half of 2011, according to a new analysis by Inside MBS & ABS. Banks increased their holdings of residential MBS by some 5.7 percent over the final six months of last year – a period during which the MBS market itself was shrinking by 2.3 percent. That raised the commercial bank share of the MBS market to 21.1 percent. Savings institutions and credit unions, both significantly smaller groups than commercial banks, also boosted their MBS holdings in 2011. In fact, the...(Includes one data chart)

Concern among non-agency MBS investors over principal reductions that will occur under the multistate foreclosure settlement “is much greater than the reality,” said Iowa Attorney General Tom Miller, who played a pivotal role in those negotiations. During a webinar sponsored by Inside Mortgage Finance this week, Miller said that the $25 billion settlement includes protections for MBS investors. He said that negotiators met with MBS investors during the drawn-out process of reaching a settlement with the five largest servicers. The Association of Mortgage Investors has complained that investors...

Ginnie Mae has seen a huge increase in business volume and appears to have adequate reserves, but the agency is still hamstrung by the federal budget process and has work to do to improve its risk management, according to a new Government Accounting Office report. With $1.186 trillion in single-family MBS outstanding and $301.7 billion in new issuance just last year, Ginnie is nearly as big as Freddie Mac – minus the retained portfolio. But the agency has a relatively small staff of full-time employees and has to get around the federal budget process by using business revenues to hire...

Investor appetite for non-agency MBS remained high in the first quarter of 2012 despite the recent uptick in new trading, but this has not done much to push prices above fair value, according to analysts. Through the first quarter of 2012, trading in non-agency MBS has been strong as the average volume in non-agency investment-grade paper more than doubled in January to $1.4 billion, said analysts at Bank of America/Merrill Lynch citing TRACE (Trade Reporting and Compliance Engine) data. TRACE facilitates the mandatory reporting of over-the-counter secondary market transactions in eligible fixed-income...

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 ...