Moody’s Investors Service agreed to a $863.79 million settlement with the Department of Justice, 21 states and Washington, DC, late last week. The settlement focused on rating activities between 2004 and 2010 involving residential MBS and collateralized debt obligations. According to the settlement, Moody’s used an internal ratings model for most tranches of certain residential MBS that was more lenient than its published guidelines, allowing for lower credit enhancement levels than what the published guidelines required. The internal model was based...

The average daily trading volume in agency MBS fell to $192.1 billion in December, the lowest reading of the year, according to the Securities Industry and Financial Markets Association. For the full year, however, average daily trading volume in agency product came to $206.6 billion, compared to $193.0 billion in 2015 and $178.0 billion in 2014. The last time trading volume was higher than in 2016 came three years earlier when $222.8 billion in agency product was traded on a daily basis. What the numbers actually mean is...

International Value Advisors recently cut its stake in Annaly Capital Management – the nation’s largest mortgage real estate investment trust – by roughly half, a development that could be repeated by other investors as rising rates cause new concerns about MBS prices. At year-end, International owned 4.55 percent of Annaly compared to 9.60 percent a year earlier. Annaly’s largest investment is in agency MBS, of which it owned $73.5 billion at Sept. 30. The publicly traded REIT is...

The residential MBS market is expected to be healthy this year, according to some ratings service analysts. But the new president is the big unknown, market participants say. According to analysts at Fitch Ratings, the rating outlook for U.S. RMBS they rate is auspicious, as they expect asset performance trends to stay positive thanks to support from solid, if somewhat uneven, gains in home prices. “Although a number of legacy transactions continue to face negative rating pressure due to declining loan counts and tail risk, rating upgrades outnumbered...

Credit quality for the loans backing unique warehouse-funding securitizations from Jefferies Funding remains strong, according to Moody’s Investors Service. One of the risks was that weaker collateral could be included in the transactions as time passed. The $225.0 million Station Place Securitization Trust 2016-1 received Aaa ratings from Moody’s last February and a $210.0 million 2016-3 transaction issued in May garnered an with Aaa rating. The rating service evaluated the deals recently as the 2016-1 securitization is set to pay down next month. “To date, there has been...

After a two-year rollercoaster ride through the court system that ended in 2015, a former Wall Street trader finds himself facing another trial in an MBS fraud case. Jess Litvak, a former bond trader with the Jeffries Group, will go on trial again after a jury found him guilty in 2014 of violating securities laws. He was accused of fraud and misleading investors about the price he had paid for residential MBS. According to attorneys with the law firm of Shepherd Smith Edwards & Kantas in Houston, the U.S. Attorney’s Office in Connecticut originally brought...

The jumbo mortgage-backed security Redwood Trust is set to issue on Jan. 20 received improved pricing compared with the company’s previous deal issued in October. The new MBS is fairly similar to the prior bond, indicating stronger demand from investors. The $343.28 million Sequoia Mortgage Trust 2017-1 priced last week. The super-senior tranche priced 1-20 back of Fannie 3.5s, which was four ticks tighter than Redwood’s previous offering, according to an analysis by Wells Fargo Securities ...

Large swaths of investors will continue to avoid buying non-agency mortgage-backed securities unless Congress passes investor-friendly reforms, according to Chris Katopis, executive director of the Association of Mortgage Investors. “Private capital has virtually left the U.S. mortgage market,” he said. “The future is likely to reflect a similar situation unless Congress helps establish the necessary systems, structures and standards for private capital to return.” In a recent study published by ...

The Department of Justice this week finalized previously announced settlements with Deutsche Bank and Credit Suisse regarding non-agency mortgage-backed security activities in the run-up to the financial crisis. The DOJ said the $7.20 billion settlement with Deutsche Bank was the single largest residential MBS resolution for the conduct of a single entity. The settlement with Credit Suisse was for $5.28 billion. Both of the settlements included civil penalties and ... [Includes two briefs]

Mortgage default rates appeared to spike higher in the fourth quarter of 2016, according to a new analysis and servicer ranking by Inside FHA/VA Lending. Some 5.51 percent of FHA loans in Ginnie Mae mortgage-backed securities pools were reported as 30- to 60-days past due at the end of December. That was up 80 basis points from the previous quarter and was easily the highest default rate in the past three years. FHA default rates were also up in more serious delinquency categories: loans 60- to 90-days past due and those over 90-days late. The figures are based on loan count and are not seasonally adjusted. Similar trends occurred in the VA home loan guaranty program. The 30-60 category was up 41 bps, while 90+ delinquencies jumped 19 bps. The supply of Ginnie single-family MBS outstanding continued to set new records. The total, not including multifamily and FHA home-equity conversion ... [4 charts]