Acting on a new policy that increases the focus on prosecuting individuals for corporate wrong-doing, the Department of Justice is reportedly planning to file criminal charges against executives at JPMorgan Chase and the Royal Bank of Scotland for the alleged pre-crisis sale of non-agency MBS to unsuspecting investors, the Wall Street Journal has reported. According to the report, the DOJ investigations were based on documents that allegedly suggested that shortly before the mortgage meltdown, executives at the two financial institutions securitized mortgages and sold them to investors knowing that the underlying loans were defective. The JPMorgan probe began after prosecutors uncovered crucial evidence from a related civil investigation in 2007: a memo from a bank employee cautioning senior executives about ...

Borrowers are increasingly changing the terms for loans backing recently issued commercial MBS shortly after the deal closes, said Fitch Ratings. The rating service said it has received about 15 requests this year for rating confirmations pertaining to loans from 2014 or 2015 vintage deals. While the majority of requests have been loan assumptions by new borrowing entities or ownership structures, a handful have contemplated more fundamental changes to other loan terms. But Fitch said the problem arises when some of the proposed changes would have required that the loan be modeled differently or more conservatively, had it known about the changes prior to issuance. The rating agency is especially concerned about borrowers trying to add more debt. “Additional debt, ...

The latest developments in the Structured Finance Industry Group’s effort to revive the non-agency MBS market have been met with praise from many industry participants. However, larger issues continue to constrain activity in the market. SFIG recently released a package of model representations and warranties for non-agency MBS. “I think this effort to standardize reps and warrants is a really important step in helping investors get more comfortable with the sector,” Grant Bailey ...

It may take Ginnie Mae a bit longer than expected to make all the accounting corrections necessary before the Department of Housing and Urban Development’s inspector general to render a clean opinion on the guarantor’s fiscal 2015 financial statement and its restated financials for FY 2014. In fact, Ginnie might have to make some significant long-term investments to address the IG’s accounting concerns, said Thomas Weakland, acting chief financial officer at Ginnie Mae. The agency may have to spend on new technology and infrastructure, and beef up its staff “spanning multiple years” to remediate all of the IG’s concerns, said Weakland. However, Weakland did not state a timeline for making all the necessary corrections and adjustments. Until the IG is fully satisfied with the restatement, it will continue to withhold an audit opinion. “We recognized some of the efforts made and the constraints that ...

Menendez Introduces HAWK Amendment in T-HUD Appropriations Bill. The National Association of Realtors recently sent a thank-you note to Sen. Robert Menendez, D-NJ, for introducing an amendment to H.R. 2577, the Transportation, Housing and Urban Development, and Related Agencies Appropriations Act of 2016, to restore HUD’s authority to offer the Homeowners Armed with Knowledge (HAWK) program. Lawmakers who were concerned about the financial condition of the FHA Mutual Mortgage Insurance Fund denied funding for the HAWK program last year in a continuing spending bill, effectively stalling the program for a year. The HAWK program is a key component of the FHA’s Blueprint for Access, which was designed to open up the credit box for underserved borrowers. Specifically, program participants will benefit from reductions in FHA premiums once they complete ...

Commercial banks and savings institutions held a record $1.608 trillion of single-family MBS in portfolio as of the end of the third quarter, according to a new Inside MBS & ABS analysis of call-report data. Banks and thrifts boosted their MBS holdings by 1.6 percent from the end of June, reaching a third consecutive record level. The gain pushed the industry’s market share of single-family MBS to an estimated 25.2 percent. Commercial banks were responsible for ... [Includes two data charts]

The second whole-loan securities risk-transfer transaction from Freddie Mac received a rating from Moody’s Investors Service. The rating service said the $634.64 million deal included a number of improvements compared with non-agency MBS, which have a similar structure. Much like non-agency MBS, the deal was backed by mortgages and included senior and subor-dinate tranches available for purchase by investors. The M1 tranche of FWLS 2015-SC02 ...

The inspector general of the Department of Housing and Urban Development refused to sign off on Ginnie Mae’s fiscal 2015 financial statement and its restated financial statement for FY 2014 due to lingering concerns about the accuracy of both statements. The IG said it was unable to obtain sufficient evidence to express an audit opinion on the fairness of the $5.4 billion in non-pooled, defaulted mortgage loans still held by Ginnie Mae. The agency also continued to use improper ...

Publicly traded real estate investment trusts that buy MBS continued to whittle down their positions in government and agency product during the third quarter, a trend that some fear may have no bottom. Market leader Annaly Capital Management trimmed its MBS holdings to $66.3 billion during the period, a 1.9 percent sequential decline, but an ugly 18.6 percent drop compared to the third quarter of last year. It is investing more of its cash in commercial product. Number two ranked American Capital Agency Corp. was...[Includes one data table]

The Structured Finance Industry Group put out the third edition of its RMBS 3.0 “Green Papers” initiative early this week, featuring dozens of model representations and warranties for new non-agency residential MBS, including a range of proposed standardized constructs. “This release substantially builds upon our growing series of Green Papers, which are aimed at restoring confidence to the ‘private label’ RMBS market,” the trade group said. The first and second editions were released in 2014. The 39 model reps and warrants included in the third edition complete...