Prepayments increased overall in September, particularly on agency fixed-rate MBS, with faster pay-downs occurring in lower coupons, according to analyst reviews of prepayment speeds. The experts expressed surprise at unexpectedly high prepayments for recent low coupon vintages and greater weakness for higher coupons. Deutsche Bank analysts reported that speeds for 4.0 percent Fannie Mae MBS issued in 2010 and 2009 more than doubled in September compared to the previous month. Speeds for similar MBS with 4.5 percent coupons increased also as much, they noted. For example, prepayment speeds for 2010 Fannie MBS with a 4.0 percent coupon...

New issuance of mortgage- and asset-backed securities faltered in the third quarter, although production levels were gaining strength in September. A new Inside MBS & ABS analysis reveals that $330.12 billion of ABS and residential MBS were issued during the third quarter, a decline of 6.3 percent from the previous three-month period. The surprisingly tepid increase in residential MBS issuance was not nearly enough to offset a substantial drop in non-mortgage ABS activity. Non-mortgage ABS issuance fell 43.4 percent from the second to the third quarter, sinking to $24.84 billion and reversing the very...(Includes one data chart)

The improvements that the Federal Housing Finance Agency is expected to make to the government’s Home Affordable Refinance Program will likely come at the expense of MBS investors, say experts. The outlines of an expanded HARP are far from clear, but the FHFA is said to be giving serious consideration to lifting the 125 percent loan-to-value limit, in addition to waiving loan-level pricing adjustments, representation and warranties imposed on lenders, valuation requirements and the portability of mortgage insurance. The agency, which oversees Fannie Mae and Freddie Mac, is expected to make an...

The credit rating industry is generally making progress in implementing a landslide of new regulatory requirements – both in the U.S. and from overseas regulators – but several firms continue to wrestle with conflict-of-interest standards and other issues, according to an annual report released this week by the Securities and Exchange Commission. Problems were found at all 10 ratings firms. The three larger nationally recognized statistical rating organizations – Standard and Poor’s, Moody’s Investors Service and Fitch Ratings – all have more than 1,000 credit analysts and credit analyst supervisors, while...

Moody’s Investors Service continued to rank as the top credit rating agency in the non-mortgage ABS market, putting its stamp on 66.9 percent of dollar volume of deals issued in the first half of the year, according to a new Inside MBS & ABS analysis. Moody’s was particularly strong in the vehicle finance and business loan sectors, with market shares approaching 75.0 percent in both categories. The company showed relatively little interest in the student ABS market, but ranked second in rating credit card deals. Standard & Poor’s ranked second overall with a 58.3 percent share of ABS ratings. That included a near...(Includes two data charts)

The strategic default problem is not going away, keeping pressure on servicers and MBS investors to find ways to dis-incentivize these actions. House prices continue to fall, and more underwater homeowners are willing to batter their credit rating and default on their mortgage to get out of an uneconomic deal. In a recent report, analysts at Deutsche Bank said the threat of legal action and risks to assets other than the mortgaged property play a large role in a homeowner’s decision to strategically default. Eleven states are considered non-recourse states, either because they explicitly forbid deficiency judgments or...

Securitization market participants continue to face significant uncertainty from regulatory forces on both sides of the Atlantic that is dampening securitization activity, raising costs and probably leaving some deals undone. Much of the problem stems from capital requirements and the use of credit ratings, which have fallen into disrepute among many lawmakers and regulators in the wake of the collapse of the subprime mortgage market and the resulting credit market freeze in 2008. After last year’s enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Federal Reserve, the Federal Deposit Insurance Corp., the...

Transparency, investor access to information and a willingness to engage in loss mitigation can help reduce the wave of litigation and investor losses resulting from repurchase demands, according to mortgage litigation experts. There’s a better alternative to fighting out buyback claims in court: all counterparties should sit down and find ways to resolve issues that trigger repurchase claims in an open and forthright manner, said panelists on a webinar hosted by Inside Mortgage Finance Publications. “We have to work together because the country is hurting and the longer this drags on, the bigger the problem is going...

Investors in non-agency mortgage-backed securities would rather not fight in court to enforce buybacks, according to Talcott Franklin, shareholder of his namesake law firm. However, Franklin said litigation has been necessary because servicers – largely those affiliated with lenders or MBS issuers – have not done enough to prevent losses. “If the banks can get it together on the servicing side and try to reduce these losses, that is going to be the best way for them to proactively reduce these [buyback] risks,” he said this week during a webinar hosted by Inside Mortgage Finance Publications. ...

Lenders looking to participate in Redwood Trust’s jumbo securitization efforts must meet high standards, according to a review of the real estate investment trust’s new jumbo mortgage-backed security. The major originators in the $375.2 million jumbo MBS Redwood issued last week were all considered “above average” by Fitch Ratings. Redwood has invested significant resources into its jumbo conduit and correspondent program in an effort to revive non-agency securitization. ...