Part of the cost to issue non-agency MBS under the new rules of the road is a stronger commitment to due diligence reviews of the collateral backing the transaction, and experts note that the process is more complex than just hiring one of the handful of companies that provide these services. “There are three basic constituencies you need to satisfy during third-party reviews,” said Eric Kaplan, managing director of mortgage finance at Shellpoint Partners during a session at the Mortgage Bankers Association National Secondary Market Conference. “There’s the law, the ratings agencies and investors...

Redwood Trust saw steady progress in growing its residential mortgage business in the first quarter of 2012, which was highlighted by two securitizations totaling $745.0 million, according to the company’s recent filing with the Securities and Exchange Commission. The Mill Valley, CA-based real estate investment trust reported first quarter income of $30 million, compared to a loss of $3 million in the previous quarter and $18 million in profits a year ago. The increase resulted from a combination of Redwood’s new mortgage banking activities that include gains from the $416 million jumbo MBS...

Fannie Mae and Freddie Mac reported robust activity in their expanded refinance programs for underwater borrowers, while Ginnie Mae is looking at new procedures to identify the potential new issuers that are most likely to become strong participants in its program. Freddie officials are very focused on the expanded Home Affordable Refinance Program, said Paul Mullings, senior VP for single-family sourcing at the government-sponsored enterprise. He told attendees at the Mortgage Bankers Association National Secondary Market Conference in New York this week that HARP now accounts for 26 percent of the refi loan...

The Mortgage Bankers Association is pushing a proposal to change the remittance schedule on Freddie Mac participation certificates and make them fully fungible with Fannie Mae pass-through MBS for good delivery under to-be-announced guidelines. The proposal would address the historical discount to Fannie MBS at which Freddie securities trade, said MBA President Dave Stevens during the group’s National Secondary Market Conference in New York this week. Freddie PCs typically trade 1 or 1.5 points behind Fannie MBS, a difference that Freddie Mac – and ultimately U.S. taxpayers, now that the government-sponsored...

Bank of America’s pending $8.5 billion settlement with non-agency MBS investors appeared to gather some momentum last week following a BofA-favorable ruling by a New York state court. New York State Supreme Court Justice Barbara Kapnick ruled the case will move forward under Article 77 rather than a broader plenary action sought by investors opposed to the amount of the settlement. The proposed settlement reached last June with 22 institutional investors would resolve BofA’s liability related to non-agency MBS issued by Countrywide. Supporters of the settlement, including the trustee, Bank of New York Mellon...

Fitch Ratings has combined its criteria for rating residential mortgage originators and third-party due diligence involved in non-agency MBS issuance. The company said the move does not involve any material changes to its rating methodology. All originators contributing loans to non-agency MBS rated by Fitch are subject to periodic reviews by the rating service that can lead to adjustments in loss estimates for the deals or even cause the company not to rate a transaction at all. The rating service will look at the performance history of the loan originator, including repurchase requests...

Western Asset Management, a real estate investment trust, has announced a $160 million initial public offering to finance purchases of agency MBS. The Pasadena, CA-based company, a fixed-income subsidiary of Legg Mason, plans to raise cash by offering 8.0 million shares to investors at a price of $20. It also plans to offer 2.2 million units, consisting of a share and a warrant to half a share, and 46,043 shares in concurrent private placements. According to Renaissance Capital, the REIT will command a market value of $207 million after the offering. JPMorgan Chase, Deutsche Bank...

Participants in the startup of the new central counterparty for agency MBS trades realized a sharp reduction in costs and operational risks, according to the CCP’s sponsor, the Depository Trust & Clearing Corp. The first settlement cycle run through the CCP resulted in a 70 percent reduction in the volume of pools and payments needed to settle all the trades, said the DTCC. The central counterparty began operation on April 2. In the first trade cycle, the CCP was able to reduce some 43,000 pool allocations to fewer than 13,000 through netting, the sponsor reported. As the month went along and...

The volume of commercial mortgages in special servicing has continued to decrease since its peak, with more loans getting transferred out than loans transferred in, thanks in great part to a large number of loan resolutions, says a new report on commercial MBS by Fitch Ratings. Special servicers decide whether to liquidate loans or modify them, with all active special servicers ultimately liquidating a larger proportion of loans than returning them to master servicing, according to the Fitch report. In total, 71 percent, or 4,160 loans, were liquidated while 1,672 were returned to master servicing. Of...

In an effort to aggressively expand the recently retooled Home Affordable Refinance Program, Fannie Mae is encouraging lenders to make the most of HARP 2.0’s looser rules on marketing directly to eligible borrowers. The government-sponsored enterprise created “outreach materials” to help jump-start lenders’ marketing efforts to would-be borrowers who aren’t aware they may qualify for a HARP refinance. “Fannie Mae developed these model ‘HARP Materials’ to facilitate borrower consideration of HARP refinancing options that may be available through participating lenders and servicers...