June 15 marks a new era for issuers and underwriters of MBS and ABS as a new rule from the Securities and Exchange Commission takes effect. For rated securities, even private placements, public disclosure of results from third-party due diligence reviews will be required before a deal is priced. Industry analysts suggest that the rule will prompt a number of changes in the market. “Many in-scope third-party due diligence services will have to be completed...

With interest rates rising again, the future looks somewhat cloudy for real estate investment trusts that invest in MBS, a situation that investors have grown accustomed to the past few years. According to figures compiled by Keefe, Bruyette & Woods, the 28 mortgage investing REITs tracked by the firm had a combined market capitalization rate of $47.8 billion at the end of May, a slight drop from a year ago when the tally was $49.0 billion. Then again, not all of the 28 are...

Fitch Ratings this week put out a new report detailing the latest updates to its criteria for monitoring U.S. residential MBS for possible ratings changes and to analyze re-securitizations of real estate mortgage investment conduit deals. Among the most significant revisions is a loss severity adjustment for newly-issued re-REMIC transactions. Fitch will adjust the model-projected loss severity assumption for pools backing newly issued re-REMIC transactions by as much as 10 percent to account for differences between model projections and recently observed loss severity trends, according to the report. Fitch’s RMBS loan loss model “assumes...

The dreary state of the prime jumbo mortgage securitization market will continue for the short term but there’s a silver lining around the bend, according to an analysis by rating agency DBRS. Despite last year’s downturn, the jumbo prime market has seen steady growth in the last five years. In 2010, Sequoia Mortgage ended the drought in the non-agency MBS with a $478.1 million deal backed by newly originated prime jumbo loans. There have been...

Refinance lending fueled the growth in mortgage originations during the first quarter of 2015, although new data suggest that the purchase-mortgage sector is taking hold. Mortgage lenders originated an estimated $221.0 billion of refi loans during the first quarter, an increase of 51.4 percent from a revised fourth-quarter production estimate of $146.0 billion. Inside Mortgage Finance refi and purchase-mortgage estimates for all four quarters of 2014 were revised to reflect just first-lien mortgage originations. Refi loans accounted...[Includes three data tables]

Over the past year speculators have placed some heavy bets against certain publicly traded mortgage companies by shorting their stocks, a “trade” that could be petering out as investors take their money off the table. According to investors and analysts who track companies such as Nationstar Mortgage, Ocwen Financial and Walter Investment Management, the share price of all three has fallen so dramatically that the days of easy profits are over. Ocwen, for example, presently trades...[Includes one data table]

Citadel Loan Servicing this week rolled out something the residential market hasn’t seen in quite some time: a nonprime second lien from a nonbank. But don’t expect a groundswell of copycat loans. Moreover, it’s doesn’t appear that Citadel’s bold move is likely to ignite the return of nonbanks to producing second liens of any type – whether it’s a closed-end second or a line of credit. Anecdotal evidence suggests...

The pending TILA/RESPA Integrated Disclosure (TRID) rule from the CFPB is going to raise the risk of losses for investors in U.S. residential mortgage-backed securities, according to a new report from Moody’s Investors Service. Currently, as Moody’s points out, RMBS trusts are liable for lender errors in calculating the finance charge, the annual percentage rate (APR) and certain other disclosures required by the Truth in Lending Act. However, they are not liable for errors on itemized settlement charges and other disclosures required by the Real Estate Settlement Procedures Act. Further, under the current regime, TILA and RESPA each require lenders to deliver both an initial and a final disclosure to consumers. “Whether an assignee can be liable for lender errors ...

Morningstar Credit Ratings may increase its presence in the residential MBS market after rating its first re-securitization last week and revising its rating criteria for new non-agency MBS. The push follows Morningstar’s initial effort to rate non-agency MBS in 2012, which didn’t generate any business. The company has rated commercial MBS and single-family rental securities. Last week, the rating service published...

Banks and thrifts held $155.55 billion of non-mortgage ABS on their books as of the end of March, a 2.3 percent decline from the previous quarter, according to a new Inside MBS & ABS analysis of call-report data. The first-quarter figures mark the fifth straight quarterly decline in bank ABS holdings, which peaked at $173.80 billion at the end of 2013. Bank ABS holdings were down 9.9 percent from the first quarter of last year. Almost every ABS category was...[Includes two data tables]