The Federal Reserve is pondering the potential of another round of MBS purchases if Fed officials collectively decide that more bond buying is required to spur growth, but industry observers say that the central bank’s repeat of such a course of action will have a marginally helpful effect at best. The Fed has been sending out signals that it is considering taking further action to encourage the sputtering recovery, including Chairman Ben Bernanke’s testimony before both chambers of Congress this week in which he said the central bank is “prepared to take further action as appropriate,” although he wouldn’t commit to a specific action. “There are a range of possibilities. A logical range includes...

In the aftermath of the collapse of the financial markets and the resulting recession, there has been a good deal of anxiety and concern that large, critical components of the U.S. and global finance markets may be vulnerable to exploitation by so-called shadow banking institutions and other entities that may be less regulated than major retail and investment banks. But such fears may be overblown, new research from the Federal Reserve Bank of New York suggests. “Financial intermediation has evolved over the last few decades toward shadow banking. With that evolution, the traditional roles of banks as intermediaries between savers and borrowers are increasingly performed by more specialized entities involved in asset securitization,” said Nicola Cetorelli and Stavros Peristiani, two researchers at the New York Fed. However, their research, drawn upon data from 1983 to 2008, has shown...

The vast majority of repurchase requests on mortgages in non-agency mortgage-backed securities were in dispute in the first quarter of 2012, according to an Inside Nonconforming Markets analysis of Securities and Exchange Commission 15Ga disclosures. However, industry analysts expect settlements to increase during the second half of this year. Securitizers reported $29.03 billion in mortgages in non-agency MBS with repurchase demands in the first quarter of 2012, with 98.6 percent of the volume classified as in dispute ... [Includes one chart]

Principal reduction loan modifications completed by five major banks as part of the national servicing settlement have not been applied disproportionately to mortgages in non-agency mortgage-backed securities, according to Fitch Ratings. Non-agency MBS investors have raised concerns that servicers that agreed to the recent $25.0 billion settlement will complete their mandated principal reduction mods on non-agency MBS instead of on portfolio loans. “Although still early, there has been no evidence of ...

Mortgage-backed security investors continue to claim that a proposal in San Bernardino County to seize certain mortgages in non-agency MBS via eminent domain is unconstitutional. They also warn that if the “Homeownership Protection Program” is implemented there will be negative consequences. “It could severely negatively impact the value of your home, it could scare away jobs from the desert, it could scare away new construction, it might even result in the inability to get a mortgage or financing anywhere in the county ...

Two of the three biggest barriers to a return of the non-agency mortgage sector – the premium capture cash reserve account and the qualified mortgage definition – are embedded in the Dodd-Frank Act, industry officials say. And the third is what’s not in the controversial law: any substantive reform of Fannie Mae and Freddie Mac. The biggest challenge to reducing the government’s domination of the mortgage market is the lack of direction on the government-sponsored enterprises, said Tom Deutsch, executive director of the American Securitization Forum, during a hearing this week.

A surge in securitization of home purchase-money mortgages during the second quarter was not enough to offset a sizable drop in refinance activity during the first three months of the year, according to a new Inside MBS & ABS analysis and ranking. A total of $372.85 billion of agency single-family MBS was issued during the second quarter, down 3.1 percent from the first three months of 2012. Although securitization of purchase mortgages rose 22.4 percent, partly from seasonal factors as well as firming in the housing market, the volume of refinance loans securitized by Fannie Mae, Freddie Mac and Ginnie Mae declined 10.6 percent.Includes two data charts.

Fitch Ratings released revised non-agency MBS surveillance criteria, but most of the changes had been implemented earlier and the updated procedures for reviewing credit ratings are not expected to have a material impact on existing deals. The rating service did note that it is in the process of developing a new nonprime MBS loan loss model that likely will have a negative impact on current ratings. The new nonprime model incorporates a new regression analysis and more conservative rating stress scenarios, Fitch said. The updated surveillance criteria include an updated model for prime MBS that was released in August 2011.

Mortgage securities investors have as much at risk as lenders from the emerging ability-to-repay consumer protection standard because borrowers will be able to challenge compliance with far fewer time restrictions, according to the American Securitization Forum. In a comment letter to the Consumer Financial Protection Bureau, the ASF urged the agency to set objective and clear standards for qualified mortgages – which will satisfy the ability-to-repay underwriting requirement imposed by the Dodd-Frank Act – and a legal safe harbor. “Otherwise, the resulting significant risk and costs of potential litigation will constrain investors from purchasing...

A federal judge in New York has given the go-ahead for a group of investors in an IndyMac Bank MBS offering to proceed as a class in a suit against Credit Suisse, the offering’s underwriter. The June 29 ruling by U.S. District Judge Lewis Kaplan granted a December 2010 request for class certification to investors as they allege Credit Suisse misled them about the quality of toxic loans underlying a $642 million MBS offering in 2006. The plaintiffs claim in their suit that the sale of the MBS, Residential Asset Securitization Trust 2006-A8, sponsored by IndyMac Bank, violated the Securities Act of 1933 because the offering falsely represented that the underlying mortgage loans were originated in accordance with IndyMac’s underwriting standards.