The aging of the subprime and prime mortgages that back the shrinking universe of non-agency MBS is gradually changing the performance trends of these loans, according to analysts speaking at a Fitch Ratings conference in New York this week. Selection bias – changes in the composition of the remaining subprime and prime mortgage pools as borrowers default or refinance – will mean different things for different asset classes, but differences between the two will likely become less pronounced over the next year, analysts said. Grant Bailey, a managing director at Fitch, explained that in many ways...

Despite lower mortgage rates, MBS prepayment speeds slowed across the board in December, particularly for the recent low coupons, while speeds for higher coupons were up slightly, according to securitization analysts. Researchers varied slightly in their estimates, saying speeds for 30-year Fannie Mae securities slowed 2-6 conditional prepayment rate for the recent low coupons (3.5-4.5 percent from 2011 and 2010). Barclays Capital analysts attributed the slowdown to reduced refinancing activity during the December holiday season. The weighted average CPR for all Fannie Mae MBS declined to...

The Federal Home Loan Banks continue to show an investment preference for Fannie Mae and Freddie Mac mortgage-backed securities during the third quarter of 2011, posting a modest increase from the previous quarter, according to a new analysis by Inside The GSEs based on data from the Federal Housing Finance Agency.Ginnie Mae securities, meanwhile, remained popular within the FHLBank system during the three-month period ending Sept. 30, 2011.GSE MBS accounted for 68.9 percent of combined FHLBank MBS portfolios, up 1.7 percent from the second quarter of 2011. The Finance Agency’s data do not separately break out Fannie and Freddie volume or share.

The mortgage securitization and servicing industries say proposed changes to the servicing compensation model for Fannie Mae and Freddie Mac securities would have a negative effect on liquidity in the to-be-announced market, hurt investors in agency MBS and increase the cost of mortgage credit for borrowers. The Federal Housing Finance Agency released a discussion paper last fall that outlined two potential new approaches to servicing compensation: a fee-for-service approach favored by the two government-sponsored enterprises, and a reserve account approach developed by lender...

Gibbs & Brun, the Houston-based law firm that spearheaded a massive investor lawsuit against Bank of America, has drawn a bead on Wells Fargo. The company announced this week that its non-agency MBS investor clients have asked two trustees – U.S. Bank and HSBC – to investigate whether ineligible mortgages were pooled in some $19 billion of Alt A and jumbo MBS issued by Wells Fargo between 2005 and 2007. Some 48 securitization trusts are covered by the action, and Gibbs & Brun said it represented investors who collectively held over a quarter of the voting rights in those trusts. “Clients...

MBS issued or guaranteed by the U.S. government will continue to maintain a zero-risk weighting under the Federal Reserve’s proposed supervisory rules for large bank holding companies, but that won’t necessarily include Fannie Mae or Freddie Mac MBS. The Fed proposal includes a wide range of issues such as capital, liquidity, credit exposure, stress testing, risk management and early remediation. It applies to bank holding companies with assets of $50 billion or more and non-bank institutions that could pose systemic risk to the financial system. The proposal reflects substantially all of the...

The group of institutional investors that negotiated a potential $8.5 billion settlement with Bank of America has recently targeted other non-agency mortgage-backed security issuers. The move is the latest development in a number of ongoing claims regarding non-agency MBS. This week, the group led by the law firm of Gibbs & Bruns asked trustees to open investigations on more than $19.0 billion of non-agency MBS issued by Wells Fargo. The investors said they hold more than 25 percent of the voting rights in 48 trusts that issued the non-agency securities between 2005 and 2007. ...

In 2011, high-touch subprime servicer Carrington Mortgage Services significantly decreased its delinquency processing timelines and had its servicer rating confirmed at the end of the year. The servicer also made adjustments after facing criticism from non-agency mortgage-backed security investors who claimed that Carrington’s practices improperly favored investments made by the hedge fund that also owns the servicer. Carrington serviced $11.73 billion in subprime mortgages as of the end of the third quarter of 2011, according to estimates by Inside Nonconforming Markets. The servicer received a mid-range rating for subprime and special servicing from Fitch Ratings, with the rating service recently confirming that Carrington “demonstrates proficiency in overall servicing ability.” ...

The number of FHA endorsements grew by a whisper in November, up 0.2 percent to 88,206 from 88,060 in October, and down a screaming 32.8 percent from last year, according to Inside FHA Lending’s analysis of agency data. Endorsements for the month totaled $14.5 billion, with purchases and first-time homebuyers leading the way. Approved lenders accounted for the bulk of originations during the month, 79.8 percent. Purchase transactions comprised 64.8 percent of total originations for the month. An estimated 96.1 percent of loans insured by FHA were fixed-rate mortgages. Purchase loans with FHA...

Business was booming at Fannie Mae and Freddie Mac during the just-completed fourth quarter of 2011, with total single-family mortgage securitization jumping 47.4 percent from the previous period, according to a new analysis and ranking by Inside Mortgage Finance. The two government-sponsored enterprises pumped out a combined $261.2 billion in single-family mortgage-backed securities during the final three months of the year. That was the highest quarterly production level of the year, but it still came up 21.2 percent short of the volume generated....(Includes three data charts)