The Treasury Market Practices Group late last week clarified its recommended fails charge trading practice for agency MBS to limit the scope to pass-throughs, where fails are most likely to happen. “The agency debt and agency MBS trading practice has been updated to reflect the TMPG’s recommendation that a fails charge apply to agency pass-through MBS issued or guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae,” the group said. The original recommendation was that the charge apply to agency MBS issued or backed by Fannie, Freddie and Ginnie Mae, which also issue most REMICs backed by agency pass-throughs. The TMPG has not...

The share of mortgage loans that were held in portfolio rather than sold into the secondary market rose for the second consecutive year in 2010, but that may have more to do with the peculiarities of the rules for complying with the Home Mortgage Disclosure Act. A Federal Reserve analysis of the lastest HMDA data found that portfolio lending, especially involving owner-occupied refinance loans, has risen since the beginning of 2009 but is still far short of the levels portfolio lenders achieved in 2004 and 2005. Overall, originators held a total of 1.30 million mortgages in portfolio in 2010, with...

The Securities and Exchange Commission is considering launching a civil injunctive action against Standard & Poor’s Rating Services, alleging violations of federal securities laws with respect to the company’s ratings for a 2007 collateralized debt obligation. According to a Form 8-K filing this week by McGraw-Hill, the rating service’s parent, the federal agency is looking into S&P’s rating of Delphinus CDO 2007-1, which was to be mostly backed by non-agency residential MBS. “In connection with the contemplated action, the [SEC] staff may recommend that the commission seek civil money penalties, disgorgement of fees and...

While it will be nice if it materializes, MBS market watchers are taking a wait-and-see posture to the Federal Housing Finance Agency’s professed intention to explore new and alternative methods of sharing Fannie Mae and Freddie Mac’s credit risk with the private sector. In a speech early this week, FHFA Acting Director Edward DeMarco outlined efforts his agency is taking to ramp up private market discipline while reducing Fannie’s and Freddie’s risk to taxpayers. “The FHFA will be considering a number of alternatives, such as expanded use of mortgage insurance and securities structures that allow for...

The Securities and Exchange Commission this week approved a proposed conflict-of-interest rule that attempts to walk a tightrope between preventing abusive securitization practices and not interfering with legitimate competitive activity in the market. The agency got a lot of feedback on how to implement the Dodd-Frank Act conflict-of-interest provisions, including from the chief sponsors of the provisions in Congress. Senate Democrats Jeffrey Merkley (OR) and Carl Levin (MI) were largely inspired by dealings in which Goldman Sachs allegedly allowed a hedge fund to choose assets for a collateralized debt obligation and then...

Recent proposals by the Securities and Exchange Commission could eliminate or impose more regulatory burden on mortgage real estate investment trusts and complicate securitizations, experts warned. The SEC earlier this month launched a preliminary effort to reconsider the exemption that REITs currently have from the Investment Company Act. Although the agency did not propose any specific changes, the REIT industry and its supporters see the initiative as a potential game-changer for how they do business. The SEC concept release, at first blush, appears to “signal impending regulatory burdens for mortgage REITs and to...

Now may be a good time for ABS investors to broaden their horizons and look into exotic asset classes, such as solar panel financing. “Over the past few decades, most of the sheer volume of securitizations has come from the cash flows of consumer asset receivables, such as mortgages, credit cards and auto loans,” said Chris DiAngelo, a partner with Katten Muchin Rosenman LLP in New York City, who moderated an industry discussion on nontraditional securitizations sponsored by the American Securitization Forum this week. “Although the auto market has returned to relatively normal issuance volumes, mortgage and...

The supply of MBS in the market edged slightly higher in the second quarter of 2011, appearing to stem a nearly two-year decline in the market, according to a new Inside MBS & ABS analysis. A total of $6.58 trillion of MBS were outstanding at the end of June, up 0.3 percent from the first quarter. The MBS market was still down 1.7 percent from a year ago. All of the growth came from Ginnie Mae and Fannie Mae. The supply of Ginnie single-family MBS rose 4.0 percent in the first quarter, hitting a record $1.12 trillion and extending a vigorous growth trend since the housing market began to unravel in 2007. Ginnie MBS accounted for...(Includes one data chart)

Although the outlines of an expanded Home Affordable Refinance Program are far from clear, MBS analysts say the most likely changes designed to help more borrowers take advantage of record low mortgage rates will not have a disastrous impact on the MBS market. Observers note that there are two ways to expand the potential HARP population: remove the existing chronological restriction (loans made prior to June 2009) or lift the current loan-to-value restriction of 125 percent. The chronological restriction is relevant because a lot of borrowers who have used HARP already could benefit from refinancing again because...

Redwood Trust is set to issue a non-agency mortgage-backed security backed by $375.2 million in jumbo mortgages, marking the issuer’s – and the mortgage market’s – second new jumbo deal this year. Fitch Ratings is giving a AAA rating based on its new tougher standards, though it remains unclear whether another service will rate the transaction. A presale report issued last week by Fitch noted the strong characteristics of Redwood’s Sequoia Mortgage Trust 2011-2. ...