Investors in non-agency MBS raised concerns about principal forgiveness required by the $25 billion national servicing settlement agreed to earlier this year by five banks. While most of the banks claimed they would focus the efforts on their own portfolio holdings, MBS investor concerns appeared to have been realized as Bank of America said about half of the principal it has forgiven was tied to mortgages in non-agency MBS. However, Shaun Donovan, secretary of the Department of Housing and Urban Development, noted this week that investors in Bank of America’s non-agency MBS agreed to allow principal reductions on their holdings. “We knew from the beginning, that because Bank of America had...

The Consumer Financial Protection Bureau announced this week that the implementation date for certain mortgage disclosures will be delayed beyond Jan. 21 to allow for coordination with the pending integrated Real Estate Settlement Procedures Act and Truth in Lending Act disclosures. Chimera Investment announced last week that it will miss reporting deadlines for its quarterly report for the third quarter of 2012. The real estate investment trust said the report required by the ... [Includes two briefs]

JPMorgan Securities and Credit Suisse Securities have agreed to pay more than $400 million combined to settle government charges that they misled investors in offerings of non-agency MBS from 2005 to 2010, according to the Securities and Exchange Commission. The SEC, working with the federal-state Residential MBS Working Group, reached separate settlement agreements with the two financial institutions after filing a complaint and issuing a cease-and-desist order. Neither JPMorgan nor Credit Suisse admitted to or denied the findings against them or any of their affiliates. The SEC alleged...

Redwood Trust issued a $301.46 million non-agency jumbo mortgage-backed security last week with the shortest seasoning period yet on the real estate investment trust’s post-crisis issuance. Loans included in the MBS were seasoned an average of 1.1 months due to Redwood’s increased loan purchase activity. Average loan seasoning on the eight other non-agency jumbo MBS deals issued by Redwood since 2010 has varied from 8.6 months on a deal in 2011 to 1.9 months on the deal Redwood issued in October ...

Members of the Residential Mortgage-Backed Securities Working Group filed a lawsuit this week against Credit Suisse Securities and reached separate settlements last week with JPMorgan Securities and Credit Suisse. New York Attorney General Eric Schneiderman, a co-chair of the working group, said federal and state regulators are working on a number of other actions. “We’re a long way away from wrapping this up,” he said. The lawsuit against Credit Suisse was filed this week by Schneiderman, alleging that ...

Securitization market professionals are jointly promoting the practice of “margining” transactions involving Fannie Mae, Freddie Mac and Ginnie Mae MBS, despite the costs involved, to reduce counterparty and systemic risks. Last week, the Treasury Market Practices Group revised its existing “best practices” for Treasury, agency debt and agency MBS markets to include a recommendation that forward-settling agency MBS transactions be margined in order to prudently manage counterparty exposures. “In order to allow market participants to develop...

The top three rating services continued to dominate the new issuance market in non-mortgage ABS during the first nine months of 2012, according to a new Inside MBS & ABS analysis, but the biggest player in the non-agency MBS market was DBRS. Moody’s Investors Service rated 69.7 percent of the non-mortgage ABS issued in 2012 as of the end of the third quarter, down slightly from its 70.4 percent share of the 2011 market. The company’s strengths were in vehicle finance and business loan ABS, where it captured more than three-quarters of new issuance by dollar volume. Standard & Poor’s ranked...[Includes two data charts]

While the nine rating services registered as Nationally Recognized Statistical Rating Organizations were largely compliant with Securities and Exchange Commission regulations and recommendations, the agency found some significant issues with the ABS rating process. In a review covering the government’s 2012 fiscal year ending in September, the SEC said one of the top three firms appeared to change its method for calculating a key financial ratio in rating certain asset-backed securitizations, but failed for several months to publicly disclose the change and its effects on the ratings. The agency includes non-mortgage ABS, commercial MBS and non-agency MBS in a single category of asset-backed securitizations. “Further, it appears the NRSRO did not consistently apply...

Two Harbors Investment and PennyMac Mortgage Investment Trust have seen healthy returns on their previous investments in vintage non-agency mortgage-backed securities but the real estate investment trusts have recently turned to other investments. Two Harbors has concentrated on agency MBS purchases while slowly ramping up jumbo loan purchases with an eye toward issuing its own MBS. PennyMac, meanwhile, shifted away from non-agency MBS purchases to correspondent lending and investing in ...

The Federal Deposit Insurance Corp. recently filed a lawsuit against the auditors of Colonial Bank alleging that they could have prevented “enormous losses” suffered by the bank due to fraud by Colonial’s largest mortgage banking customer, Taylor Bean & Whitaker Mortgage. The lawsuit is the first by the FDIC post-crisis against the accountants of a failed bank. Colonial was closed in August 2009 by the Alabama State Banking Department and the FDIC was named as receiver and is now ...