Bank of America appeared to clear a hurdle in getting final approval for its proposed $8.5 billion MBS settlement when the New York State Supreme Court last week dismissed an attempt to overturn the deal by an investor group that was not included in the settlement. New York State Supreme Court Justice Barbara Kapnick dismissed the complaint brought by Walnut Place LLC and related entities on March 28 saying that the investors can’t sue BofA directly without giving the Bank of New York Mellon enough time to act in its role as the MBS trustee. Walnut Place’s appeal seeks to revive its suit against BofA. Walnut...

Prudential Financial last week utilized a unique hybrid MBS/covered bond structure to finalize a $1.0 billion bond secured by vintage subprime MBS. Standard & Poor’s, which gave Prudential Covered Trust 2012-1 an A rating, said the original balance of the MBS was approximately $2.8 billion. Proceeds from the sale of the notes are being used to buy a pool of MBS from Prudential Insurance. The issuer will then sell investors the Class A notes and the proceeds will be passed through to Prudential Financial. The underlying certificates are expected to generate sufficient cash flows to make the...

A new investor survey from JPMorgan Chase shows that money managers and other major investor classes have little capacity to purchase significant amounts of MBS, leaving a wide open market for real estate investment trusts to pick up the slack. “From a technical perspective, many investors are already overweight the sector, so there is assumedly limited room for significant further purchases from private investors,” the report said. The status of Fannie Mae and Freddie Mac as leading MBS investors has eroded since they were placed in conservatorship in 2008, and their portfolios are likely to remain...

Non-agency MBS deals have been plagued in the last two to three years by increasing instances of gaps and mismatches between expected collateral cash flow and payouts to bond holders, according to analysts at Barclays Capital. Most of the mismatches are attributable to balance capitalization, modifications and advances, either stopped or recovered by the mortgage servicers. Since most of the discrepancies are due to the treatment of delinquent mortgages, the gaps are widest in subprime. Sporadic mismatches have been spotted in option ARMs and Alt A hybrid loans as well, the analysts said...

Fannie Mae and Freddie Mac mortgage-backed securities remained the preferred investment choice of the Federal Home Loan Banks during the fourth quarter of 2011, with a minor decline posted from the previous quarter, according to a new analysis by Inside The GSEs based on data from the Federal Housing Finance Agency. Ginnie Mae securities likewise posted a decline within the 12 FHLBank system during the three-month period ending Dec. 31, 2011. GSE MBS accounted for 69.6 percent of combined FHLBank MBS portfolios, down 2.1 percent from the third quarter of 2011. The Finance Agency’s data do not separately break out Fannie and Freddie volume or share.

Three former Fannie Mae executives, including the company’s one-time CEO, have petitioned a federal judge to toss the securities fraud case the government filed against them late last year. Filed last week in the U.S. District Court for the Southern District of New York, the motion to dismiss contends the Securities and Exchange Commission is thin on proof that the GSE, at the direction of the then top executives, failed to disclose to investors the companies’ exposure to subprime mortgages prior to the 2008 housing market crash.

Mortgages modified by Freddie Mac performed slightly better than Fannie Mae loans in the short term while the performance gap between the two GSEs widened further one year after modification, according to the Office of the Comptroller of the Currency.OCC’s latest Mortgage Metrics Report noted that Freddie loans had an 11.3 percent re-default rate three months after modification, while Fannie mods saw an 11.7 percent rate. At the six-month mark, Freddie stood at 18.1 percent compared to Fannie’s 18.8 percent.

Mortgage lenders delivered a hefty $303.9 billion in single-family home loans to Fannie Mae and Freddie Mac securitization programs during the first quarter of 2012, the biggest flow of new business to the government-sponsored enterprises in over a year, according to a new analysis and ranking by Inside Mortgage Finance. During the first three months of 2012, GSE single-family securitization jumped 16.2 percent from the fourth quarter. It marked the fourth straight quarterly increase in production of Fannie and Freddie mortgage-backed securities after the market troughed...(Includes three data charts)

A mere 4.7 percent of repurchase demands on loans in non-agency mortgage-backed securities have been resolved, according to a new analysis by Inside Nonconforming Markets. The $352.7 million in completed repurchases account for a small portion of the up to $64.18 billion in recoveries analysts estimate non-agency MBS investors could see from representation and warranty issues. According to new filings with the Securities and Exchange Commission, $7.45 billion in repurchase demands on non-agency MBS had been made as of the end of 2011. The first-time reports were filed by securitizers that are still in business and did not include heavyweights such as Bear Stearns, Countrywide Financial, IndyMac, Lehman Brothers and Washington Mutual ... [Includes one data chart]

An ongoing Securities and Exchange Commission investigation into possible misconduct related to Wells Fargo’s sale of almost $60 billion in MBS has resulted in the agency filing a subpoena enforcement action in the U.S. District Court for the Northern District of California against the firm. “The commission is investigating possible fraud in connection with Wells Fargo’s sale of nearly $60 billion in residential MBS to investors,” the SEC said. “Pursuant to subpoenas dating back to September 2011, the bank was obligated to produce (and agreed to produce) documents to the...