A report from a Standard & Poor’s structured finance team says several collateralized loan obligation transactions rated between 1994 and 2009 are about to close with minimal defaults while a re-port from Moody’s Investors Service warns that apparently harmless provisions of CLOs can actually increase risks to investors. It has been nearly a decade since the last CLO 1.0 deal was issued, and the last of these transactions are nearing the end of their lives, according to ...

The prepayment rates for ABS backed by Property Assessed Clean Energy programs are on the rise which can have mixed effects on the notes, warned Morningstar Credit Ratings in a new report. The monthly annualized conditional prepayment rates averages for residential PACE ABS rated by Morningstar have been increasing from “single digits to high teens” since 2016, said the credit rating service. “Investors should pay attention to prepayment rates because they can have ...

Sales of agency mortgage servicing rights were up in the second quarter, mostly as a result of heavier coissuance volume, according to an exclusive new Inside Mortgage Trends analysis and ranking. Servicing rights on $129.57 billion of agency mortgages changed hands during the second quarter, up 6.4 percent from the first three months of the year. The data are culled on Fannie Mae, Freddie Mac and Ginnie Mae mortgage-backed securities ... [Includes three data charts]

Michael Bright’s quick, effective response to the VA loan-churning problem that led to rapid prepayments in Ginnie Mae mortgage-backed securities earned kudos from senators during his confirmation hearing this week. Judging by the positive responses of members of the Senate Committee on Banking, Housing and Urban Affairs, Bright, the administration’s choice to lead Ginnie Mae, will likely get the job. Bright received praise particularly for the swift disciplinary action he took against lender/issuers that were targeting and misleading VA borrowers into repeated refinancing without any clear benefit. Nine lenders were directed to take corrective actions while three of the worst offenders were barred from the agency’s multi-issuer security pools. Bright joined Ginnie Mae in July 2017 as executive vice president and chief operating officer. Two months later he began an investigation into rapidly prepaying VA loans ...

Interest-only loans represent a growing share of collateral securitized by commercial MBS conduits over the past few years. Credit rating agencies are concerned because IO loans generally perform worse than amortizing mortgages.

Moves by three issuers of prime non-agency mortgage-backed securities to allow for third-party due diligence reviews to be completed on fewer than 100 percent of the loans in an MBS could increase the risk of losses for MBS investors, according to Moody’s Investors Service. In a report released this week, Moody’s said narrower due diligence reviews increase the likelihood of defective loans appearing in non-agency MBS. The rating service added that representations ... [Includes five briefs]

Mortgage originations have been trending lower but there’s still plenty of demand in the secondary market for new production, according to industry participants. There’s demand from both MBS investors and aggregators that package mortgages for securitization.

California remained the biggest market in the U.S. for primary mortgage insurance during the second quarter, but other states had higher proportions of insured loans, according to an Inside Mortgage Trends analysis of agency loan-level data. In Florida, Virginia and Georgia, more than 60 percent of agency loans carried some form of primary mortgage insurance ... [Includes one data chart]

The Department of Housing and Urban Development has issued an interpretive rule to clear up some of the confusion created by the recently approved Dodd-Frank reform act regarding the eligibility of certain VA refinance loans to serve as Ginnie Mae collateral. Although interpretive rules are exempted from public comment under the Administrative Procedures Act, HUD is seeking public input on its interpretation of the loan-seasoning provision of the Economic Growth, Regulatory Relief, and Consumer Protection Act, which President Trump signed into law on May 24, 2018. Among other things, the statute prohibits Ginnie from guaranteeing payment on a security backed by a mortgage that does not meet its seasoning requirements. The protective measure was designed to deter lenders from encouraging veterans to refinance their loans often and repeatedly. Loan churning led to faster prepayment speeds on the ...

The mortgage industry this week continued to look for ways to resolve the VA streamline refi loan mess, which arose from the implementation of statutory seasoning requirements under the Dodd-Frank reform act, even as Ginnie Mae pointed to Congress to come up with a solution. At issue is approximately $500 million worth of “orphaned” VA Interest Rate Reduction Refinance Loans that are now ineligible for Ginnie Mae securitization. The Mortgage Bankers Association is asking Congress for a legislative fix but is also looking for other forms of relief. Pete Mills, MBA’s senior vice president of residential policy and member management, is trying to drum up investor interest in the orphan loans, which, for now, appear destined for the secondary “scratch and dent” market. More buyers could potentially generate higher bids for the loans and lower losses for nonbanks that could not deliver them ...