The Department of Veterans Affairs is drafting a new policy to address ongoing confusion about its Interest Rate Reduction Refinance Loan program and ease investor anxiety. The uncertainty among VA lenders stems from the treatment of IRRRLs under the VA’s interim final rule defining what constitutes a “qualified mortgage.” That rule took...

In general, it hasn’t been a pretty picture this year when it comes to the sale of “bulk” mortgage servicing rights, especially Ginnie Mae receivables. According to figures compiled by affiliate publication Inside Mortgage Trends, bulk MSR transfers (one barometer of sales) increased 20.6 percent in the second quarter compared to the first with roughly $42.9 billion of Fannie Mae, Freddie Mac and Ginnie product changing hands. The third quarter is expected...

Atlantic Bay Mortgage Group recently started offering its loan originators a unique option in terms of compensation: a share of the servicing fee. More than 90 percent of loan originator compensation plans are based on an LO’s volume, according to surveys conducted by Stratmor Group. Atlantic Bay’s Progressive Earnings Plan allows LOs to earn an annuity stream of income from mortgages when the lender retains the servicing. Rebecca Chaney, a senior executive vice president of legal affairs at Atlantic Bay, likened...

The motivations of buyers and sellers in the mortgage servicing market appear to be at odds, and sellers are hoping for some sort of buyer conversion to light up the market and get more deals. At the Ginnie Mae Summit last week, panelist Michael Ehrlich, senior mortgage specialist at Thomson Reuters, indicated that sellers are itching to see more mortgage servicing rights deals but there are not too many buyers lining up. “The demand from sellers to sell is...

Foreign investors, commercial banks and mutual funds all beefed up their holdings of agency MBS during the second quarter of 2016, according to a new Inside MBS & ABS analysis. The Federal Reserve remained the biggest investor in the agency MBS market with $1.744 trillion on its books at the end of June. That accounted for 29.7 percent of the $5.867 trillion of single-family agency MBS outstanding at that time, but it was down 0.5 percent from the end of March. The central bank’s MBS holdings vary slightly in the Fed’s weekly snapshots as pending transactions wait to clear, but its game plan is to hold its portfolio steady by reinvesting principal payments. The single-family agency MBS market grew...[Includes two data tables]

The effort by some non-agency MBS investors to create an entity to protect investors took a step forward as a sample deal-agent agreement was circulated late last week in advance of the ABS East conference in Miami. A deal agent would be tasked with protecting the interests of investors in non-agency MBS, including duties of care and loyalty. The leaders of the effort, James Callahan, a principal at Pentalpha Global and Alessandro Pagani, head of securitized assets at Loomis Sayles & Company, said the market should adopt the agreement as the template for new non-agency MBS. However, the sample agreement leaves...

The complex financing arrangements used by certain investors and a lack of clarity from federal regulators can make it difficult to determine the entity responsible for meeting risk-retention requirements in some MBS and ABS, according to Charles Sweet, senior counsel at the law firm of Morgan Lewis. The Dodd-Frank Act generally required the sponsor of a security to retain at least 5.0 percent of the risk from the security. Sweet said determining the sponsor of an MBS or ABS can be fairly straightforward when one company originates the assets, services the receivables and initiates securitization, as in the case of an ABS backed by automobile retail contracts from a captive finance company of a car manufacturer. However, where securitization roles are more dispersed, Sweet said...

There have been a number of MBS issuers that have fallen short of Ginnie Mae’s strict liquidity and net worth requirements for all participants, but tighter oversight has cured most, if not of all of the cases, according to Ginnie’s top counterparty risk chief. Speaking this week at the annual Ginnie Mae summit in Washington, DC, Zack Skochko, director of counterparty risk, said several issuers have failed liquidity audits in 2016 by not maintaining the minimum $1 million cash or 10 basis points of outstanding Ginnie securities required to participate in the agency’s MBS program. The agency also requires...

JPMorgan Chase is set to end another lull in the issuance of jumbo mortgage-backed securities. The $395.40 million JPMorgan Mortgage Trust 2016-3 is scheduled to be issued next week, according to a presale report from Fitch Ratings. The most recently issued jumbo MBS priced in mid-August and was also from Chase. Only two firms with active conduits have issued jumbo MBS this year: Chase and Redwood Trust. Two Harbors Investment and WinWater Home Mortgage issued ...

The nonprime mortgage-backed security issued last week by Lone Star Funds priced at tighter spreads than the deal the company issued in June, indicating increased demand among investors. The $217.00 million COLT 2016-2 was also larger than the previous $161.40 million deal from Lone Star. According to Deutsche Bank Securities, spreads of A-1 tranche and A-2 tranche in COLT 2016-2 were respectively priced at 130 basis points and 175 bps, significantly tighter than ...