Issuance from new participants in the non-agency jumbo mortgage-backed security market wasn’t enough to offset reduced activity by Redwood Trust and others in the third quarter of 2013, according to a new ranking and analysis by Inside Nonconforming Markets. Issuance of jumbo MBS slowed particularly in September, as Shellpoint Partners delayed its planned security and PennyMac Corp. made changes to attract investors. A total of $3.94 billion in non-agency jumbo MBS was issued in the third quarter, a 9.1 percent decline from the previous quarter and about level with the issuance seen in the first three months of 2013. Redwood and Credit Suisse, the jumbo MBS sector’s two biggest players, slowed...[Includes one data chart]

Officials at Redwood Trust are calling for a gradual decline in conforming loan limits as opposed to an immediate repeal of the high-cost agency loan limits. Martin Hughes, CEO and director of the real estate investment trust, said market disruption due to a decline in loan limits is unlikely while non-agency mortgage-backed security investors said additional reforms are necessary. “If the conforming loan limits are reduced, I believe the private market would aggressively compete for those loans that exceed the new limit without any market disruption,” Hughes wrote in testimony this week for a hearing by the Senate Committee on Banking, Housing and Urban Affairs. He drew a parallel to the reduction of the high-cost loan limit in 2012 from $729,750 to $625,500. A gradual decline in the high-cost loan limit would be...

Jumbo mortgage-backed security structures used by Redwood Trust, PennyMac Corp., and others pose risks for investors, according to Moody’s Investors Service, although the rating service said bonds will only incur losses in “low-probability scenarios.” Moody’s raised concerns about features that go beyond the simple senior-subordinate structures that have been most common since the restart of the non-agency MBS market. Those features include...

Higher-priced mortgages accounted for a scant 1.0 percent of loan sales in 2012, according to an Inside Nonconforming Markets analysis of data from the Home Mortgage Disclosure Act. Originations of higher-priced mortgages increased slightly compared with 2011 but the growth didn’t keep up with the increase in overall originations. Higher-priced first liens have an annual percentage rate at least 1.5 percentage points above the average prime offer rate. Federal regulators use the metric as a proxy for subprime mortgages. Some $15.80 billion in higher-priced mortgages were sold...[Includes one data chart]

Citadel Loan Servicing, which specializes in non-agency loans, has increased its maximum loan-to-value ratio to 80 percent from 75 percent. The change, which came about a week ago, is for fully documented loans.The privately held nonbank made the switch in response to borrower demand. “The phones are ringing like a son-of-a-gun,” said Citadel CEO Dan Perl. The Irvine, CA-based firm originates...

The FHA was still able to endorse single-family mortgage loans during the first week of the partial government shutdown, although no FHA staff were available to underwrite and approve loans. A significant delay in the processing of new FHA insurance applications might have occurred this week because only 64 employees are still at work in HUD’s Office of Housing, which includes the FHA. HUD said it might need more essential employees per day, on an intermittent basis, to perform key activities. The department expects these calls for reinforcement to ...

The Department of Housing and Urban Development’s Mortgagee Review Board has collected $1.9 million from Oct. 1, 2012, through June 30, 2013, from actions taken against FHA lenders. The MRB actions involved 30 lenders, of whom 15 agreed to settle and seven agreed to indemnify HUD for its losses, according to the board’s latest data. The indemnification agreement covered 166 FHA-insured loans, and 11 lenders lost their authority to participate in the FHA single-family mortgage program. Cases heard by the MRB involved infractions, such as failure to implement and maintain a quality control plan and to review early payment default loans, which resulted in ...

The FHA has clarified the meaning of “continuous income” and announced other updates to its loss mitigation home-retention options to help distressed borrowers retain their homes and, thus, reduce the number of claims against the Mutual Mortgage Insurance Fund. FHA lenders are required to implement the updated policies in Mortgagee Letter 2013-32 by Dec. 1, 2013. “Continuous income” is one of the criteria a defaulting borrower must meet in order to qualify for a loan modification. While it generally refers to employment income (e.g., wages, salary or self-employed earnings), it may also include ...

Wells Fargo claimed partial victory after a Manhattan federal district court judge dismissed certain claims against it in a government lawsuit alleging the bank lied about the quality of defaulted mortgages insured by the FHA. District Court Judge Jesse Furman ruled that legal injury claims based on events that happened prior to June 2009 were time-barred and that the government had waited too long to file a lawsuit. He also threw out claims of negligence and unjust enrichment. On the other hand, Furman let stand claims under the Financial Institutions Reform, Recovery and Enforcement Act of 1989, which the ...

HUD Delays Implementation of Short-Sale Participation Requirement. The implementation of the PFS Participation Requirement, which is found in Mortgagee Letter 2013-23, Updated Pre-Foreclosure Sale and Deed-in-Lieu-of-Foreclosure Requirements, has been delayed indefinitely. All other provisions included in the mortgagee letter remain in effect. Previous guidance on short-sale participation requirements also remain in effect until further notice. FHA to Consolidate Lender ID Numbers. The FHA will consolidate the lender identification numbers of those participating in both the FHA Title I and Title II programs, provided ...