The stellar returns on non-agency mortgage-backed securities purchased via the Public-Private Investment Program have faltered this year, prompting some to call for a revamp of the program. Invesco – the fund that has seen the most success with the PPIP – also recently announced that it quit the program after having difficulties finding appropriate investments. ... [includes one data chart]

Prospects for a return of elevated conforming loan limits remain unclear after the Senate approved a reinstatement provision in an appropriations bill in October. Most conservatives in the House remain strongly opposed to the reinstatement – which would likely delay the return of the non-agency market. More than 30 percent of members of the House support a temporary reinstatement of elevated conforming loan limits, according to a letter sent to House leaders this week. ...

Redwood Trust took a loss on the $375.2 million jumbo mortgage-backed security it issued at the end of September, officials at the real estate investment trust revealed this week. However, the company plans to issue another jumbo MBS within the next few months and anticipates turning a profit on its non-agency activity in the long-term. ...

Credit rating agencies appear to be more generous in rating structured finance products over other bond types because they tend to bring in more revenue, according to a recent study by academics. Researchers at Indiana University, American University and Rice University said that, contrary to assertions by the top credit rating agencies, asset classes are not equal when it comes to ratings. The study “Credit Ratings Across Asset Classes: A=A?” claims there is overwhelming evidence that structured products, such as MBS, receive significantly higher, more optimistic ratings than those assigned to bonds issued by...

Fannie Mae, Freddie Mac and their federal conservator are trying to devise a new servicing compensation scheme without upsetting the to-be-announced agency MBS market that Wall Street dealers and Main Street mortgage lenders depend on. In a recent white paper outlining two alternatives for reforming servicing compensation so that more resources are available for distressed loans, the Federal Housing Finance Agency said “promoting continued liquidity” in the TBA market is one of its primary objectives. The agency also mused that a new servicer compensation system for the government-sponsored enterprises could...

With the non-agency MBS sector still languishing, it’s time to put the approximately $6.3 billion in unused purchasing power at the Public-Private Investment Program to use in a revamped iteration, according to analysts at Deutsche Bank. “The Public-Private Investment Program has been having a tough time in 2011 despite a remarkable initial success in facilitating price discovery and supporting market functioning in the residential MBS market,” said two Deutsche Bank analysts in a recent report. They note that all eight of the Public-Private Investment Funds suffered a declining internal...

The proposed bill that would increase standardization and uniformity in the mortgage securities market – without Fannie Mae or Freddie Mac – contains many worthy components, but it needs more details and further tweaking, according to industry experts testifying at a House Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises hearing this week. The Private Mortgage Market Investment Act, drafted by Subcommittee Chairman Scott Garrett, R-NJ, would create a heavily regulated mortgage-backed securities market made up solely of private entities that would function with no federal...

Agency residential MBS production bounced higher again in October, but the latest refinance boom – if it even qualifies as one – is still well short of the last cyclical high in late 2010. A new Inside MBS & ABS ranking and analysis reveals that $103.03 billion of agency single-family MBS were issued last month, a 7.0 percent gain from September. And October marked the third straight monthly increase after the agency MBS market hit a 30-month low back in July. Production in October still trailed the levels generated in the first two months of 2011, when the previous refi boom was...(Includes one graph and one data chart)

The chairman of the House subcommittee that oversees the GSEs unveiled a bill late this week that seeks to drastically overhaul the secondary mortgage market – without the need for Fannie Mae or Freddie Mac.The Private Mortgage Market Act would create a heavily regulated mortgage-backed securities market consisting strictly of private entities functioning without a federal guarantee, according to Rep. Scott Garrett, R-NJ.Garrett, who chairs the House Financial Services Subcommittee on Capital Markets and Government-Sponsored Enterprises, said the goal of his legislation is to facilitate continued standardization and uniformity, ensure rule of law and provide MBS investors with the necessary transparency and standardization to ensure “that a deep and liquid market develops” without Fannie and Freddie.

All the major components of the non-mortgage ABS market saw significant declines in new issuance during the third quarter, returning new production to the levels experienced for most of the past two years. Total ABS issuance fell 43.4 percent to $24.84 billion, according to a new Inside MBS & ABS ranking and analysis. That followed a surge to $43.92 billion in the second quarter, that helped lift the total for the first nine months of 2011…