Ginnie Mae is in sound financial health and poised to potentially absorb any FHA losses, if required, but the enduring fallout from Taylor, Bean & Whitaker’s collapse three years ago continues to plague the agency, according to an independent audit commissioned by the Department of Housing and Urban Development Inspector General. The report by CliftonLarsonAllen disclosed no material weaknesses in Ginnie’s internal controls over financial reporting and no instance of legal or regulatory noncompliance during fiscal years 2012 and 2011. Ginnie’s loss reserves for its MBS program declined to $357.4 million in fiscal 2012, from $395.8 million at the end of fiscal 2011. “Ginnie Mae believes...

The latest planned non-agency jumbo MBS from Redwood Trust will have lower credit enhancement levels than other recent deals issued by the real estate investment trust, according to presale reports released this week. The AAA tranche on Redwood’s sixth non-agency MBS issuance of the year will have credit enhancement of 7.05 percent, down from 7.30 percent on the three previous deals issued by Redwood. Officials at Redwood along with others interested in non-agency MBS have suggested that credit enhancement levels required by the rating services have been too high. The credit enhancement for Sequoia Mortgage Trust 2012-6 will be the lowest on a non-agency MBS backed by new loans since the MBS issued by Redwood in 2010 had 6.50 percent credit enhancement on the AAA tranche. Fitch Ratings, Kroll Bond Rating Agency and Moody’s Investors Service are set...

Participants in collateralized loan obligation deals remain optimistic about the future of the market although they caution that macroeconomic issues might still derail the product’s slow return. In a panel discussion hosted by Standard & Poor’s last week, CLO market executives maintained a positive outlook for CLO performance as the market experienced a resurgence early this year. The market collapsed after the financial crisis but has apparently been resuscitated by investors hungry for high-risk, high-return securities. CLOs acquire...

Delinquencies on non-agency MBS will likely increase temporarily due to Hurricane Sandy, according to industry analysts, but long-term losses due to the storm are expected to be minimal. Insurance will play a key factor in overall losses, and estimates vary significantly on the extent of coverage in the affected areas. Moody’s Investors Service projected this week that non-agency MBS are unlikely to suffer material losses due to Sandy even though the affiliated Moody’s Analytics estimated the damage to residential housing from the storm will hit $10.5 billion. “Even if damages exceed...

Fannie Mae and Freddie Mac continued to trim their retained holdings of MBS and unsecuritized mortgages during the third quarter, but at a slower pace than in previous periods, according to an analysis by Inside MBS & ABS of earnings reports released this week by the two government-sponsored enterprises. One of the conditions of the conservatorships the GSEs entered four years ago was that they would reduce their retained mortgage portfolios by 10 percent a year. Those terms were revised in August to include a 15 percent annual wind-down, which would take each GSE’s investment portfolio down to $250 billion by the beginning of 2018, four years sooner than under the previous arrangement. As Freddie noted...[Includes one data chart]

The ACLU is calling for changes to federal anti-discrimination statutes to deter secondary mortgage market participants from engaging in business practices that might have a discriminatory impact on certain protected classes of borrowers. In a recent analysis of mortgage foreclosures, the ACLU said the origination and securitization of subprime and other high-risk mortgage products have hurt minority families and caused the loss of 3.5 million homes to foreclosure. The ACLU believes...

The Securities and Exchange Commission has been quietly meeting with investors in non-agency mortgage-backed securities looking for leads to bring regulatory actions. Reaction from investors to the SEC’s outreach has been decidedly mixed, though Reid Muoio, a deputy for the SEC’s structured and new products unit, said the SEC is working to improve regulation on behalf of investors. Speaking at the recent ABS East conference sponsored by Information Management Network in Miami, Muoio detailed an SEC outreach program that was apparently previously undisclosed. He said that a ...

Investors interested in buying new non-agency mortgage-backed securities suggest that the wide variety seen in the pooling and servicing agreements and reporting of vintage non-agency MBS is insufficient. Many investors at the recent ABS East conference in Miami sponsored by Information Management Network called for standardization. “Investors clearly welcome standardization,” said Dapeng Hu, a managing director at BlackRock, which manages more than $150.0 billion in MBS investments ...

The volume of loans guaranteed by the Department of Veterans Affairs rose 4.0 percent in the third quarter of 2012, reflecting an upward trend that the agency attributes to strong underwriting. A production increased to $33.3 billion from $32.0 billion in the second quarter and $28.3 billion in the first quarter. The agency reported $93.6 billion in total originations over the nine-month period, with refinancing accounting for 51.8 percent of guaranteed loans. “VA has had the best performing loans in the industry for quite some time, with the ... [1 chart]

The three-month surge in agency MBS issuance appeared to run out of steam in October, as total agency securitization of single-family mortgages dropped 11.4 percent from the previous month, according to a new market analysis and ranking by Inside MBS & ABS. The sharpest decline was in Fannie Mae issuance. The government-sponsored enterprise cranked out $58.92 billion in single-family MBS last month, down 28.4 percent from September’s volume. It marked the lowest monthly production for Fannie since April, when the GSE issued just $46.12 billion in volume. Securitization activity at Freddie Mac was...