Redwood Trust is set to issue a non-agency mortgage-backed security backed by $375.2 million in jumbo mortgages, marking the issuer’s – and the mortgage market’s – second new jumbo deal this year. Fitch Ratings is giving a AAA rating based on its new tougher standards, though it remains unclear whether another service will rate the transaction. A presale report issued last week by Fitch noted the strong characteristics of Redwood’s Sequoia Mortgage Trust 2011-2. ...

The supply of MBS in the market edged slightly higher in the second quarter of 2011, appearing to stem a nearly two-year decline in the market, according to a new Inside MBS & ABS analysis. A total of $6.58 trillion of MBS were outstanding at the end of June, up 0.3 percent from the first quarter. The MBS market was still down 1.7 percent from a year ago. All of the growth came from Ginnie Mae and Fannie Mae. The supply of Ginnie single-family MBS rose 4.0 percent in the first quarter, hitting a record $1.12 trillion and extending a vigorous growth trend since the housing market began to unravel in 2007. Ginnie MBS accounted for...(Includes one data chart)

Although the outlines of an expanded Home Affordable Refinance Program are far from clear, MBS analysts say the most likely changes designed to help more borrowers take advantage of record low mortgage rates will not have a disastrous impact on the MBS market. Observers note that there are two ways to expand the potential HARP population: remove the existing chronological restriction (loans made prior to June 2009) or lift the current loan-to-value restriction of 125 percent. The chronological restriction is relevant because a lot of borrowers who have used HARP already could benefit from refinancing again because...

Now may be a good time for ABS investors to broaden their horizons and look into exotic asset classes, such as solar panel financing. “Over the past few decades, most of the sheer volume of securitizations has come from the cash flows of consumer asset receivables, such as mortgages, credit cards and auto loans,” said Chris DiAngelo, a partner with Katten Muchin Rosenman LLP in New York City, who moderated an industry discussion on nontraditional securitizations sponsored by the American Securitization Forum this week. “Although the auto market has returned to relatively normal issuance volumes, mortgage and...

Recent proposals by the Securities and Exchange Commission could eliminate or impose more regulatory burden on mortgage real estate investment trusts and complicate securitizations, experts warned. The SEC earlier this month launched a preliminary effort to reconsider the exemption that REITs currently have from the Investment Company Act. Although the agency did not propose any specific changes, the REIT industry and its supporters see the initiative as a potential game-changer for how they do business. The SEC concept release, at first blush, appears to “signal impending regulatory burdens for mortgage REITs and to...

The Securities and Exchange Commission this week approved a proposed conflict-of-interest rule that attempts to walk a tightrope between preventing abusive securitization practices and not interfering with legitimate competitive activity in the market. The agency got a lot of feedback on how to implement the Dodd-Frank Act conflict-of-interest provisions, including from the chief sponsors of the provisions in Congress. Senate Democrats Jeffrey Merkley (OR) and Carl Levin (MI) were largely inspired by dealings in which Goldman Sachs allegedly allowed a hedge fund to choose assets for a collateralized debt obligation and then...

While it will be nice if it materializes, MBS market watchers are taking a wait-and-see posture to the Federal Housing Finance Agency’s professed intention to explore new and alternative methods of sharing Fannie Mae and Freddie Mac’s credit risk with the private sector. In a speech early this week, FHFA Acting Director Edward DeMarco outlined efforts his agency is taking to ramp up private market discipline while reducing Fannie’s and Freddie’s risk to taxpayers. “The FHFA will be considering a number of alternatives, such as expanded use of mortgage insurance and securities structures that allow for...

The outstanding supply of home-equity loans in the market declined further in the second quarter of 2011, hitting its lowest level in almost six years, but there are signs that the HEL market is at least stabilizing. The Federal Reserve reported a balance of $904.4 billion of home-equity lines of credit and closed-end second mortgages outstanding as of the end of June, down 2.3 percent from the first quarter and 9.2 percent lower than a year ago. The vast majority of the HEL market is on the books of banks, thrifts and credit unions, which collectively held $827.7 billion in portfolio. Finance companies, some of them owned by... [Includes two data]

Expect a gradual but deliberate increase in Fannie Mae and Freddie Mac guarantee fees to a level that more closely reflects what a private market would charge, the head of the Federal Housing Finance Agency announced this week. In a speech at the American Mortgage Conference in Raleigh, NC, FHFA Acting Director Edward DeMarco said that since Fannie and Freddie were placed into government conservatorship three years ago this month, the two government-sponsored enterprises have steadily increased g-fees and lessened the degree of cross subsidization in credit pricing. Yet, DeMarco noted, the GSEs’ current pricing for credit guarantees “is...

For a growing number of lenders, the decision to adopt a mortgage pipeline hedging strategy is fast becoming less of an innovative option and more about adapting to a business necessity to stay ahead of the curve, according to a white paper by MCT Trading Inc. MCT, a San Diego-based risk management and advisory services company, details in its recently issued paper the intricacies for mortgage bankers considering the switch from a best efforts delivery platform to a mandatory delivery model. "There are a number of different pitfalls lenders need to be cognizant of when making the move from best efforts loan sales to...