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]

The Chicago Federal Home Loan Bank hopes to issue its very first Ginnie Mae MBS by the third quarter, and if all goes well certain other FHLBanks may become issuers as well. In a recent speech, Federal Housing Finance Agency Director Mel Watt noted the interest in the program, saying the agency has “approved the requests of several other FHLBanks to participate.” Watt did not identify...

A federal appeals court in Chicago has set aside a $2.46 billion judgment against HSBC’s Household International unit and three of its top executives and ordered a new trial. Investors won the judgment in 2009 based on charges that the bank and its top executives misled them about its mortgage lending practices. The price of the stocks subsequently collapsed as the subprime mortgage market unraveled, causing huge investor losses. The class-action lawsuit alleged...

A new analysis by an economist at the Federal Reserve suggests that the Dodd-Frank Act’s risk-retention requirements won’t adequately address the issues that caused the structured finance market to essentially freeze in 2007. A paper by Alyssa Anderson suggests a deposit insurance-like agreement between investors and private market firms or the government would better protect investors from losses and reduce ambiguity. She stressed that increased uncertainty about securities, the potential length and depth of a downturn and possible government intervention contribute to investors shying away from securitization markets. “Given the presence of ambiguity, the market freeze can persist...

Real estate investment trusts and new investors in the mortgage business could provide funding for nonconforming lending, but securitization remains challenged, according to various experts at the recent secondary market conference sponsored by the Mortgage Bankers Association. The non-agency mortgage-backed securities market is very subdued, said Laurie Goodman, director of the Housing Finance Policy Center at the Urban Institute. Issuance has been running at about ...

JPMorgan Chase and Credit Suisse are coming to market with separate jumbo mortgage-backed securities that have some sharp differences in terms of collateral. The $379.78 million JPMorgan Mortgage Trust 2015-3 includes some unique characteristics such as a handful of loans with combined loan-to-value ratios above 80.0 percent and some interest-only mortgages. While the average combined LTV ratio for mortgages to be included in the deal is 69.9 percent, 15 mortgages ...