A non-agency MBS sponsored by CarVal Investors issued this week includes a new fee-based compensation structure for one of the servicers involved in the $474.2 million transaction. Mill City Mortgage Loan Trust 2015-1 is backed by re-performing mortgages that had seasoned for nearly nine years, on average. Some 90.1 percent of the loans had received modifications and almost all of the mortgages in the deal were current at the time of issuance. Shellpoint Mortgage Servicing will service...

PIMCO led non-agency MBS investors in the filing of a class-action lawsuit against Citibank last week, alleging that Citi didn’t adequately perform trustee duties on MBS issued before the financial crisis. The lawsuit claims violations of New York’s Streit Act, which has been cited in several other lawsuits against trustees. PIMCO et al v Citibank was filed in New York’s state supreme court. Other investors involved in the filing include AEGON, Kore Advisors, Prudential and Sealink Funding Limited, and the plaintiffs aim to include all that have invested in 25 non-agency MBS where Citi is the trustee. The deals were issued...

Morningstar Credit Ratings proposed new criteria this week to rate residential MBS. The rating service published similar criteria in May but Morningstar has only rated one deal backed by new residential mortgages since then. The biggest addition in the proposed criteria details how Morningstar plans to handle transactions that include primary mortgage insurance. The provision could help Morningstar rate risk-sharing transactions from the government-sponsored enterprises. The rating service said...

An increase in interest rates by the Federal Reserve is likely to be accompanied by a change to a Fed program that could have a significant impact on investors’ cost to finance purchases of MBS, according to industry analysts. The Fed could increase interest rates as soon as Dec. 16. In a report released this week, analysts at Deutsche Bank Securities noted that Fed officials have discussed removing a cap on the Fed’s overnight reverse-repurchase program when interest rates increase. “That program will almost surely put...

Among the regulatory initiatives underway at the Securities and Exchange Commission is a potential crack-down on conflicts of interest at credit rating agencies. In the SEC’s latest regulatory agenda, the agency noted that its Office of Credit Ratings is “considering recommending that the commission propose rules and amendments designed to address the conflicts of interest associated with the issuer-pay business model.” In other words, at issue is...

Most mortgage lenders reported a significant uptick in purchase-mortgage originations during the third quarter of 2015, though there is little sign that originators are lowering credit standards to stimulate more business. According to revised estimates by Inside Mortgage Finance, purchase-mortgage originations climbed 10.7 percent from the second to the third quarter of this year, hitting $280 billion. At that level, the purchase market was the strongest it has been since the third quarter of 2007. At the same time, credit standards – at least in the agency market – have eased...[Includes two data tables]

First-time homebuyers are reportedly sitting on the sidelines and have dropped to their lowest levels in three decades, according to the National Association of Realtors. In its latest annual survey of buyers and sellers, NAR noted that the share of first-time buyers declined to 32 percent, from 33 percent a year ago and the lowest since first-time buyers spiraled down to 30 percent in 1987. But not so fast, says Edward Pinto, former chief credit officer of Fannie Mae and co-director and chief risk officer of the International Center on Housing Risk at the American Enterprise Institute, who disputes NAR’s data and describes the first-time buyer market as “booming.” “The buyers are...

Fannie Mae last week updated its policies to allow seller/servicers to pledge a transfer of interest in their servicing income as collateral. Now Fannie, Freddie Mac and Ginnie Mae have three different approaches for the pledge of servicing income and/or servicing advances. David Fleig, president and CEO of MorVest Capital, an investment firm, noted that the update by Fannie follows a move by Ginnie. Last year, Ginnie started allowing issuers to pledge servicing income without notifying Ginnie. Fannie’s new policy requires...

Commercial banks and savings institutions continued to pull back from the non-mortgage ABS market during the third quarter of 2015, according to a new Inside MBS & ABS analysis of call-report data. Banks and thrifts reported a combined $140.93 billion of non-mortgage ABS on their books at the end of September, down 5.3 percent from midyear. The decline marked the seventh consecutive decline in bank ABS holdings since they peaked at $175.54 billion at the end of 2013. Bank ABS investment tumbled 15.0 percent in the year since September 2014, hitting its lowest level since the end of 2011. The industry’s holdings were down in all ABS categories. In percentage terms, the sharpest downturn was in home-equity ABS, although this ...

Two former officials at Standard & Poor’s called on the Securities and Exchange Commission to look for violations of new rules involving rating shopping. The SEC published a final rule with new requirements for rating services in August 2014. In a recent paper, Mark Adelson and David Jacob pushed the SEC to use the new rule to go after rating services that make adjustments to rating criteria in an effort to gain business, with a focus on the structured-finance market. Adelson and Jacob said such rating shopping by issuers has been “widespread” since the mid-1990s. Adelson was S&P’s chief credit officer from May 2008 until December 2011. He is currently the chief strategy officer of The BondFactor Company, which focuses ...