The Federal Reserve’s Open Market Committee fulfilled investor expectations this week by voting to reduce its support of the financial markets by another $10 billion overall, starting next month. That will reduce its targeted monthly increase in its agency MBS portfolio from $35 billion to “just” $30 billion. With new production of agency MBS falling more quickly than the central bank’s targeted purchases, the Fed may actually be taking a larger chunk of the market. When the Fed announced a $5 billion per month reduction in its MBS growth target in November, actual agency MBS issuance declined by more than twice as much, $11.3 billion, from the previous month. The FOMC said...[Includes one data chart]

Investors in non-agency MBS continue to push for increased transparency on both vintage securities and new issuance. Issuers suggest that they want to provide additional information to investors but costs and regulatory issues have prevented adequate communication. A significant number of investors attending the ABS Vegas conference last week said bondholder communication on non-agency MBS is rarely adequate. The conference was sponsored by the Structured Finance Industry Group and Information Management Network. Bill Moliski, a managing director at SG Capital, an investment management firm, has...

A number of structured-finance products outside of new non-agency MBS rebounded from the financial crisis, offering stronger returns than new non-agency MBS, and often with less risk. Among the myriad of products investors at the ABS Vegas conference last week said they prefer to new non-agency MBS were collateralized-debt obligations backed by trust-preferred securities, collateralized-loan obligations, commercial MBS, rail car ABS and container ABS. “There’s...

A Manhattan federal bankruptcy court this week approved Lehman Brother’s proposed $2 billion-plus settlement that would end an $18.9 billion claim filed against the defunct investment bank by Fannie Mae over soured mortgage securities. Judge James Peck of the U.S. Bankruptcy Court for the Southern District of New York, signed off on the settlement agreement between Lehman Brothers Holdings Inc. and the government-sponsored enterprise, as well as Lehman’s wholly owned subsidiaries Aurora Commercial Group and Aurora Loan Services. ALS was a large Alt A lender/servicer. The deal grants...

The Treasury Department and the Structured Finance Industry Group announced separate initiatives last week aimed at increasing activity in the non-agency market. Both efforts plan to round up a variety of industry participants to work through issues that have prevented significant issuance of new non-agency mortgage-backed securities. “In the absence of an apparent leader, Treasury plans to coordinate a series of conversations with relevant regulators, market participants and other stakeholders to help ...

Mortgages included in new non-agency mortgage-backed securities that fall outside of the safe harbor for qualified mortgages will be assigned higher loss expectations, according to criteria released last week by Standard & Poor’s. Other rating services have released similar criteria, with credit-enhancement requirements expected to be higher for non-agency MBS that include loans other than safe harbor QMs. The Consumer Financial Protection Bureau’s ability-to-repay rule established a number of ...

Spurred by low interest rates and strong house price appreciation, Home Equity Conversion Mortgage loan originations rose 20.3 percent during the first nine months of 2013 compared to the same period the year before, according to Inside FHA Lending’s analysis of FHA snapshot data. HECM lenders reported $11.8 billion in total originations over the nine-month period, with initial principal amount at loan origination totaling $7.8 billion. Purchase reverse mortgage loans comprised 94.5 percent while fixed-rate mortgages accounted for ... [1 chart]

Ginnie Mae is considering lengthening the approval time for transfers of mortgage servicing rights (MSRs) to 90 days or more from the current 30 days but has yet to issue guidance. The agency alerted sellers of MSRs and their investment banking advisors of the forthcoming change in late November at an “education summit” in Washington, according to a participant, who preferred anonymity. New and existing issuers participated in the event, and a copy of Ginnie Mae’s presentation was provided to Inside Mortgage Finance, an affiliated publication. Ginnie Mae declined to comment on the report. However, according to the presentation, the reason for ...

VA Lenders’ Compliance with CFPB’s Ability-to-Repay and Qualified Mortgage Rules. Until the Department of Veterans Affairs’ rule on ATR/QM is in place, all VA lenders must comply with the requirements of the Truth in Lending Act, as established by the Consumer Financial Protection Bureau’s ATR/QM rule, according to a recent agency guideline. VA will continue to guarantee all loans made in compliance with existing VA requirements, regardless of their QM status, the agency clarified. It urged lenders to refer to the CFPB guidance to ensure all their VA loans are ...

Mortgage originations late last year sank to the lowest production level since the bottom fell out of financial markets in the fourth quarter of 2008, according to a new market analysis and ranking by Inside Mortgage Finance. Lenders generated an estimated $305 billion in new originations during the fourth quarter of last year, a 33.7 percent decline from the third quarter. The mortgage market hasn’t been that slow since the fourth quarter of 2008, when production totaled just $260 billion. Production volume was...[Includes two data charts]