Redwood Trust took three months off from issuing jumbo MBS but came back with something of a doozy this week: a $306.05 million deal that will include some loans that don’t meet standards for qualified mortgages and some loans that weren’t subject to third-party due diligence reviews. Sequoia Mortgage Trust 2014-2 is set to receive AAA ratings with credit enhancement of 7.75 percent on the top-rated tranche. While the credit enhancement requirements are somewhat high, a jumbo MBS from Redwood in November had even higher credit enhancement levels, suggesting that the non-QMs and lack of full due diligence aren’t a major concern. Only three of the 438 mortgages to be included in the deal are...

A promising surge in purchase-mortgage lending was the key ingredient in the 13.3 percent increase in agency issuance of single-family MBS during the second quarter of 2014, according to a new market analysis and ranking by Inside MBS & ABS. Fannie Mae, Freddie Mac and Ginnie Mae issued a total of $212.23 billion of single-family MBS during the second quarter. That was a nice gain from an exceptionally poor $187.38 billion in production during the first three months, but it still marked the second lowest quarterly volume since the beginning of 2005 – and it fell short of the $213.12 billion produced at the low point in the financial crisis at the end of 2008. The agencies securitized...[Includes two data charts]

The six lawsuits filed in June by institutional investors against non-agency MBS trustees are just the beginning of actions against trustees, according to an attorney who has pursued representation-and-warranty claims against non-agency MBS issuers. “We are likely to see a flood of litigation against trustees alleging that the banks sat on their hands and blew the statute of limitations on valuable putback claims,” according to Isaac Gradman, an attorney at Perry Johnson Anderson Miller & Moskowitz. The June lawsuits by BlackRock, PIMCO and other institutional investors targeted...

Real estate investment trusts that have been gobbling up MBS the past few years – and paying hefty dividends in the process – may have some more room to run, especially if interest rates remain relatively benign. “Given the tailwinds of lower prepayment speeds and Fed purchases, we believe that payout levels should remain stable in the near term,” said one veteran analyst who works for a top five bank. This analyst, who tracks several large REITs that invest in agency securities, added...

Fitch Ratings has consolidated a number of key rating drivers into updated master rating criteria for residential MBS backed by newly originated and seasoned residential mortgages. The latest report replaces the July 2013 RMBS criteria, and while no material changes have been made to the overarching process, a few tweaks have been made. The important rating drivers that were incorporated include...

A GSE reform bill filed late this week by a trio of House Democrats is less a last ditch effort to push their measure across the finish line this year than a bid to have the first word in next year’s debate over housing finance reform, note industry observers. The Partnership to Strengthen Homeownership Act, H.R. 5055, by Reps. John Delaney (MD), John Carney (DE), and Jim Himes (CT), follows through on their January draft proposal to seek a “middle ground” between the existing, politically untenable legislative proposals.

The rebound in new business at Fannie Mae and Freddie Mac during the second quarter of 2014 was fueled by a hefty increase in purchase-mortgage activity, but it also featured clear shifts in the volume of loans coming from different kinds of lenders. A new Inside Mortgage Trends analysis of loan-level data on mortgage-backed securities issued by the two government-sponsored enterprises shows that nonbank lenders continued to ... [Includes 3 data charts]

Thanks to lousy origination profits posted over the past six months, mortgage bankers increasingly are boosting earnings through servicing-released arrangements, causing a mini-boom in flow transactions. “You might say we’re back to a normal operating environment where originations are cash-flow negative,” which is forcing lenders to book profits through MSR sales, said Jeff Levine, managing director of Houlihan Lokey, an investment banking firm. But Levine is...

The Treasury Department issued a wide-ranging request for comments last week as part of an effort to increase issuance of non-agency mortgage-backed securities. Treasury officials said they are working toward developing standards and practices for the non-agency MBS market. “The private-label securities market has been dormant since the financial crisis,” said Treasury Secretary Jacob Lew. “The fact is, we need to attract more private capital to the housing market ...

The new lenders contributing to jumbo mortgage-backed securities could pose risks to investors in the deals, according to Standard & Poor’s. The rating service said that due diligence and strong underwriting standards currently mitigate the risks, but there are concerns that the lenders with limited track records won’t be able to fulfill representation-and-warranty repurchase obligations. Jumbo MBS have seen contributions from a mix of lenders. The main contributors ...