The Department of Justice and other allied parties this week reached a $1.375 billion settlement with Standard & Poor’s to resolve allegations that the firm’s investment-grade ratings misled investors into buying securities backed by badly underwritten mortgages. The agreement resolves the DOJ’s 2013 lawsuit against S&P and its parent, McGraw Hill Financial Inc., along with the suits filed by 19 states and the District of Columbia. Each of the lawsuits alleges that investors incurred substantial losses on residential MBS and collateralized debt obligations that carried S&P’s ‘AAA’ ratings, which effectively masked their true credit risks. S&P was accused...

BlackRock Financial Management plans to issue a unique ABS backed by peer-to-peer consumer loans originated via the platform established by Prosper Marketplace. Moody’s Investors Service assigned ratings to Consumer Credit Origination Loan Trust 2015-1 last week, noting a number of issues for investors to consider. The ABS is expected to have a balance of $344.85 million. The loan pool Moody’s examined had a balance of $306.71 billion as of the end of December. Approximately 14 percent of the total assets are expected to be added after closing. The deal doesn’t have a projected closing date yet, according to Moody’s. The rating service assigned...

A few months, back there was scattered talk in the market that a wave of consolidation might hit publicly traded real estate investment trusts that specialize in agency MBS. But thanks to continued low interest rates and the fact that mortgage REITs continue to trade below book value, such a rollup is looking highly unlikely. “I don’t see it happening,” said Credit Suisse analyst Doug Harter. “Why would you sell for below book value when you can just liquidate?” Jason Stewart, an analyst at Compass Point Research & Trading, agrees...

The Mortgage Bankers Association has secured a favorable clarification from the Financial Accounting Standards Board regarding the treatment of seriously delinquent mortgages in Ginnie Mae pools. The clarification was requested after one of the Big Four accounting firms began requiring lenders that service 90 days plus delinquent loans to put the loans on the balance sheet with an offsetting liability even if they do not intend to buy the loans out of the pool. The requirement would have been...[Includes one data chart]

If issuers were to include agency-eligible mortgages with slightly less than pristine underwriting standards in new non-agency mortgage-backed securities, the deals could receive ratings with credit enhancement levels similar to the levels on recent jumbo MBS, according to the results of an exercise released this week by the Treasury Department. Treasury asked six rating services to assign ratings to hypothetical non-agency MBS comprised of $19.75 billion of mortgages ...

JPMorgan Chase this week issued the largest jumbo mortgage-backed security seen since the market started to return in 2010. The $940.06 million deal was backed by adjustable-rate mortgages originated by First Republic Bank. Previously, the largest post-crash deal was a $666.13 million jumbo MBS from Redwood Trust in February 2013. Prior to the financial crisis, many non-agency MBS had balances that topped $1.0 billion, while most jumbo MBS ...

Regulators, rating services and investors are all targeting Ocwen Financial’s servicing of mortgages in non-agency mortgage-backed securities. Company officials responded by acknowledging some of the issues while strongly pushing back on others. Fitch Ratings and Moody’s Investors Service both recently downgraded Ocwen’s servicer ratings. When a servicer’s ratings fall below a certain level, non-agency MBS investors sometimes have the option to ...

After loosening every month for more than a year, underwriting on jumbo mortgages started to tighten in mid-2014, according to new data from the Mortgage Bankers Association and AllRegs. In the past three months, jumbo underwriting has started to loosen again and standards are the loosest they have been since early 2011.Angel Oak Mortgage Solutions announced that it launched a mini-correspondent offering for non-agency nonprime ... [Includes three briefs]

The Mortgage Bankers Association notched a win for small, independent issuers after the Financial Accounting Standards Board agreed with the group’s position on the accounting of seriously delinquent loans in Ginnie Mae pools. At issue is whether companies that service pools with loans that are 90 days or more delinquent should put those loans on their balance sheet even if they have no intention of buying the loans out of the pool. According to the MBA, a Big Four accounting firm issued controversial guidance which would have been burdensome for small mortgage-backed securities issuers that have limited funding and no incentive or history of buying defective loans out of pools. After months of exchanges, FASB staff finally agreed with the MBA’s view that the decision process involves two steps. First, a loan must be 90 days or more delinquent and trigger ...

A long-awaited proposal from the Federal Housing Finance Agency that would codify minimum net worth and liquidity requirements for Fannie Mae and Freddie Mac seller/servicers received mostly good reviews from the industry, but there are concerns about some of the details. For the Mortgage Bankers Association, the chief worry centers around the agency’s liquidity requirements. Released late last week, the FHFA is asking...[Includes one data chart]