Fannie Mae, Freddie Mac and Ginnie Mae have been around for decades and they dominate the residential MBS market, but the agencies are not standing still. Pushed by their federal conservator, Fannie and Freddie are rebuilding their securitization infrastructure and trying to reinvent how they do business with mortgage sellers. At the annual convention of the Mortgage Bankers Association this week, the Federal Housing Finance Agency announced an agreement in principle on changes to the representations-and-warranties framework used by the government-sponsored enterprises. Ginnie officials disclosed new issuer eligibility standards and performance evaluations. “GSE reform does not mean...

The Securities and Exchange Commission has provided more details about a pilot project to test the revised requirements for shelf registrations that are part of Regulation AB II. ABS issuers must comply with the new rules and forms, other than asset-level disclosures, no later than Nov. 23, 2015. The SEC’s Division of Corporation Finance recently invited ABS issuers to request staff review of their registration statements in draft form, prior to filing. “We will select...

Issuers of securities backed by assets other than residential mortgages were able to win some concessions from federal regulators in the final risk-retention rule that was approved this week. However, the standards for “qualified” loans that are exempt from risk-retention requirements are much more stringent than those for qualified-residential mortgages, even including downpayment requirements in some instances. The risk-retention requirements for non-mortgage ABS and commercial MBS take effect two years after the final rule is published in the Federal Register. Securities that include loans that don’t qualify for exemptions will be required to have risk-retention of at least 5.0 percent, though there are instances when the required retention can be lower. The final standards qualifying commercial loans, commercial real-estate loans and auto loans were...

The Federal Reserve’s decision late last year to taper its agency MBS purchases appears to have contributed to higher mortgage rates, which in turn has helped lead to “significant reductions” in Fannie Mae and Freddie Mac guaranty fee revenue on MBS issued so far this year, according to the Federal Housing Finance Agency’s Inspector General. The evaluation report issued by the IG late this week concluded that continued tapering by the Fed and the eventual reduction of its massive MBS portfolio could have an “adverse impact” upon the financial performance of the two government-sponsored enterprises. “Although the Federal Reserve’s [quantitative easing] programs benefitted the enterprises’ financial condition in 2012 and 2013, its decision, among other factors, in late 2013 to taper its MBS purchases contributed...

Although credit unions have boosted their share of new mortgage production in recent years, they continue to be only modest investors in residential MBS, a situation that isn’t likely to change anytime soon. According to figures compiled by Inside MBS & ABS, the credit union industry held $105.27 billion in residential MBS on its books at June 30, a 2.4 percent sequential decline. Compared to the same period a year earlier, their investment in mortgage securities fell by even more: down 4.8 percent. And that may not be such a bad thing. MBS prices were...[Includes one data chart]

A New York trial court judge has dismissed an investor lawsuit alleging fraud by Merrill Lynch in the sale of residential MBS because the plaintiffs failed to meet the state’s pleading standard for fraud claims. Justice Charles Ramos of the New York Supreme Court dismissed an amended complaint brought by Phoenix Light SF Ltd. and other investors against Merrill Lynch and several big banks. The complaint combined...

The non-agency mortgage-backed securities market got clarity about risk-retention requirements in a new final rule approved this week by six federal regulators. Given current market conditions, it is unlikely to have any impact. The regulators created an exemption big enough to drive a truck through. Sponsors of non-agency MBS backed by qualified residential mortgages are not required to retain a 5 percent interest in the transaction. As expected, the QRM parameters were lined up with ...

It could take years for the non-agency mortgage-backed securities market to even approach the depth and liquidity it had before the housing meltdown, according to experts participating on a panel during the annual convention of the Mortgage Bankers Association this week in Las Vegas. The main reason non-agency MBS issuance does not amount to much is the huge bank demand for jumbo mortgages, said Tom Millon, president and CEO of Capital Markets Cooperative. Only about 77 percent of ...

Underwriting trends for jumbo mortgage-backed securities were mixed as of the third quarter of 2014, according to an analysis by Inside Nonconforming Markets. While some issuers started to include mortgages with higher loan-to-value ratios, average combined LTV ratios in jumbo MBS were actually higher for deals issued in the fourth quarter of 2013 than those priced in the third quarter of 2014. Average credit scores on issuance for the third quarter were ... [Includes one data chart]