Prepayments increased overall in September, particularly on agency fixed-rate MBS, with faster pay-downs occurring in lower coupons, according to analyst reviews of prepayment speeds. The experts expressed surprise at unexpectedly high prepayments for recent low coupon vintages and greater weakness for higher coupons. Deutsche Bank analysts reported that speeds for 4.0 percent Fannie Mae MBS issued in 2010 and 2009 more than doubled in September compared to the previous month. Speeds for similar MBS with 4.5 percent coupons increased also as much, they noted. For example, prepayment speeds for 2010 Fannie MBS with a 4.0 percent coupon...

New issuance of mortgage- and asset-backed securities faltered in the third quarter, although production levels were gaining strength in September. A new Inside MBS & ABS analysis reveals that $330.12 billion of ABS and residential MBS were issued during the third quarter, a decline of 6.3 percent from the previous three-month period. The surprisingly tepid increase in residential MBS issuance was not nearly enough to offset a substantial drop in non-mortgage ABS activity. Non-mortgage ABS issuance fell 43.4 percent from the second to the third quarter, sinking to $24.84 billion and reversing the very...(Includes one data chart)

Moody’s Investors Service continued to rank as the top credit rating agency in the non-mortgage ABS market, putting its stamp on 66.9 percent of dollar volume of deals issued in the first half of the year, according to a new Inside MBS & ABS analysis. Moody’s was particularly strong in the vehicle finance and business loan sectors, with market shares approaching 75.0 percent in both categories. The company showed relatively little interest in the student ABS market, but ranked second in rating credit card deals. Standard & Poor’s ranked second overall with a 58.3 percent share of ABS ratings. That included a near...(Includes two data charts)

Investors in non-agency mortgage-backed securities would rather not fight in court to enforce buybacks, according to Talcott Franklin, shareholder of his namesake law firm. However, Franklin said litigation has been necessary because servicers – largely those affiliated with lenders or MBS issuers – have not done enough to prevent losses. “If the banks can get it together on the servicing side and try to reduce these losses, that is going to be the best way for them to proactively reduce these [buyback] risks,” he said this week during a webinar hosted by Inside Mortgage Finance Publications. ...

Lenders looking to participate in Redwood Trust’s jumbo securitization efforts must meet high standards, according to a review of the real estate investment trust’s new jumbo mortgage-backed security. The major originators in the $375.2 million jumbo MBS Redwood issued last week were all considered “above average” by Fitch Ratings. Redwood has invested significant resources into its jumbo conduit and correspondent program in an effort to revive non-agency securitization. ...

Ginnie Mae is following its own path in exploring potential changes to servicer compensation, a project that parallels the Federal Housing Finance Agency’s Joint Initiative on Fannie Mae/Freddie Mac servicing compensation. As part of the FHA’s effort to improve default servicing, Ginnie Mae and other government housing agencies will be working separately to develop better claims mechanisms and pooling services as well as clearer risk and warranty delineations to improve the value of securitizations, the FHFA said. In a discussion paper, the FHFA, which oversees Fannie Mae, Freddie Mac and the Federal Home Loan Banks, said ...

Debt-for-equity, a strategy commonly used in buyout deals among companies in Europe, is being floated as an idea to help underwater U.S. homeowners and the lenders avoid taking bigger losses if the mortgage ends up going to foreclosure. In a debt-for-equity arrangement, the borrower would refinance an underwater mortgage for a new loan that reflects the house’s current market value as an alternative to going to foreclosure. In return for reducing the loan amount, the lender takes an equity position that allows it to share in any future house price appreciation.Proponents say...

The supply of mortgage debt outstanding continued to decline in the second quarter of 2011, reaching levels not seen in nearly five years. The Federal Reserve reported that single-family mortgage debt totaled $10.396 trillion as of the end of June, down 0.5 percent from the end of the previous quarter. It marked the 13th consecutive quarterly decline in the mortgage servicing business, which has shrunk by $783.2 billion since peaking in the first quarter of 2008 at $11.179 trillion. The only sector of the market that’s growing is the Ginnie Mae program, where the supply of the agency’s single-family mortgage securities...(Includes one data chart)

Banks, thrifts and credit unions expanded their stakes in the residential MBS market over the first half of 2011 as most other major investor classes pulled back from the market, according to a new analysis by Inside MBS & ABS. But the profile of the MBS investment community will likely continue to change as the Federal Reserve has opted to resume buying agency MBS in an effort to stimulate the economy by pushing long-term interest rates lower. While the result of resumed Fed MBS purchases is uncertain, the Federal Open Market Committee’s decision to reinvest payments on the Fed’s agency MBS back into...(Includes one data chart)

A proposal from federal regulators to change servicer compensation on future Fannie Mae and Freddie Mac MBS to a fee-for-service model could also end up addressing a major investor beef about the non-agency MBS market: poor servicing of distressed loans and misaligned interests. The Federal Housing Finance Agency this week released a discussion paper outlining a radical change from an existing system that pays Fannie and Freddie servicers a minimum servicing fee regardless of the loan status. The proposed system features a low flat fee for handling performing loans with increased compensation for...