At least 170 non-agency MBS serviced by Ocwen Financial took combined losses of more than $1.0 billion in May due to accounting for principal forbearance that occurred before July 2012. The reporting issue allowed mezzanine bonds to continue receiving interest payments, and industry participants are concerned that the accounting could be an issue on other non-agency MBS. Moody’s Investors Service said the newly realized losses relate to loss mitigation by Homeward Residential. Ocwen acquired Homeward at the end of 2012. The servicing transfer prompted a disclosure by Ocwen to Wells Fargo, the trustee on the deals previously serviced by Homeward, in the May remittance reports on the deals. Wells said...
At first, residential origination volumes were slow at Citadel Loan Servicing Corp., a new player in a lonely market: nonprime production. But that was two months ago, when the Irvine, CA-based company first opened its doors. “People are finally calling us,” said Dan Perl, CEO of the privately held nonbank. By the time June ends, the company will have funded almost $6 million for the month, maybe as much as $8 million. The origination numbers, of course, are miniscule compared to monthly conventional volume, but in the “new” nonprime space Citadel is probably doing more business than the two-dozen or so nonprime or hard money lenders that are quietly toiling away in selected markets. For the industry to revive...
Sallie Mae’s recently announced plan to split into two publicly traded companies isn’t leaving analysts at ratings services or Wall Street firms with much to cheer about on multiple fronts. In late May, the Sallie Mae board of directors authorized newly appointed CEO John Remondi to press ahead with plans to split the company’s existing businesses into two publicly traded entities – a new education loan management firm, known as NewCo, and a consumer banking company, to be known as Sallie Mae Bank. The board’s stated intention with the move, talked about since at least as early as 2010, is...
U.S Bank may proceed on a limited basis in its legal claim against Bank of America and Countrywide Financial in connection with a soured $1.75 billion MBS deal after a New York state judge ruled last week to narrow the case to just a fraction of the loans in dispute. Judge Eileen Bransten dismissed a breach of contract claim against BofA that sought to force the bank to repurchase some 4,400 loans in the pool due to “pervasive breaches” in the representations and warranties of the securities. U.S. Bank, in its capacity as trustee for HarborView Mortgage Loan Trust, sued BofA and Countrywide in August 2011 seeking repurchase of non-performing loans from the underlying residential MBS. The judge said...
Reports of short sales being the new “order of the day” for servicers appear to be overblown. The proclamations were prompted by a report last week from Fitch Ratings. Banks have indeed increased their use of short sales in lieu of loan modifications when completing loss mitigation on non-agency mortgages. Meanwhile, special servicers largely avoid short sales and short sales on agency mortgages are declining. Short sales performed by the bank servicers on mortgages in non-agency mortgage-backed ...
Mortgage industry participants are largely opposed to changes to accounting for credit losses proposed by the Financial Accounting Standards Board in December. FASB proposed replacing the current impairment model, which reflects incurred credit events, with a model that recognizes expected credit risks and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. FASB also aims to reduce complexity by replacing the numerous existing ...
Fannie Mae and Freddie Mac mortgage-backed securities remained the preferred investment choice of the 12 Federal Home Loan Banks during the first quarter of 2013, with a negligible decrease from the previous quarter, while a number of FHLBanks indicated no plans to sell the riskier non-agency MBS in their portfolios. A new analysis and ranking by Inside The GSEs based on data from the Federal Housing Finance Agency found overall MBS investments for the dozen FHLBanks declined 1.0 percent to $137.14 billion between the fourth and first quarters. However, non-agency MBS, which made up 18 percent of the total FHLBank system’s share of MBS during the first three months of this year, fell to $24.69 billion as of March 31, 2013. This was down 2.9 percent from the fourth quarter of 2012 and down 13.5 percent from $28.52 billion from the same period a year ago.
The Federal Housing Finance Agency has settled its second mortgage-backed securities lawsuit in its massive litigation effort against non-agency MBS issuers and underwriters that sold to Fannie Mae and Freddie Mac. Citigroup last week agreed to pay damages to settle allegations that the investment bank sold $3.5 billion of faulty MBS to the two GSEs in the years leading up to the financial crisis. The FHFA filed suit during the summer of 2011 against 18 financial institutions, including Citi, alleging violations of the federal Securities Act of 1933.
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