Analysts at Morningstar Credit Ratings have begun to see non-agency single-property investor loans materialize with a new twist: less dependence on the borrower’s ability to repay and more reliance on the cash flow stream of rental income. “The majority of loans made to landlords backed by single properties are underwritten as consumer loans, not business-purpose loans. The lender will scrutinize the borrower’s credit, income and assets,” RMBS analysts Brian Grow, Becky Cao and Olgay Cangur said in a new report. Also, rental income is included as part of the borrower’s overall income when calculating the borrower’s personal debt/income ratio and, thus, the probability of default. “Recently, Morningstar has been presented...

The purchase-mortgage market took the biggest hit during the fourth-quarter slowdown in mortgage originations, but strength in first-time buyer activity helped soften the blow. According to a new Inside Mortgage Finance analysis and ranking, refi originations held steady at $175 billion during the fourth quarter. Although refinance activity in the second half of 2015 was down sharply from the first six months of the year, it was still significantly stronger than at any time in 2014 and year-to-date refi originations were up 60.0 percent in 2015. The purchase-mortgage market also grew...[Includes three data tables]

The California Supreme Court late last week issued a ruling in a case where a borrower challenged the foreclosure of a loan that was included in a non-agency MBS issued in 2007. The court allowed the borrower’s claims to proceed, which could prompt a significant increase in foreclosure-related litigation for California mortgages in non-agency MBS. An opinion authored by Kathryn Werdegar, an associate justice of the California Supreme Court, stresses that the court’s ruling in Yvanova v. New Century Mortgage is narrow. “We hold only that a borrower who has suffered a non-judicial foreclosure does not lack standing to sue for wrongful foreclosure based on an allegedly void assignment merely because he or she was in default on the loan and was not a party to the challenged assignment,” Werdegar said. The ruling left...

The unexpected decline in mortgage rates this year has moved a significant portion of the agency MBS market into the zone where it’s worthwhile for borrowers to refinance, according to a new analysis of agency MBS data by Inside MBS & ABS. As of the end of December, some 24.4 percent of loans backing Fannie Mae, Freddie Mac and Ginnie Mae MBS had mortgage rates ranging from 4.01 percent to 4.50 percent. Altogether, $1.500 trillion of existing single-family mortgages were in that bucket. According to Inside Mortgage Finance, the average offering rate for 30-year fixed-rate conventional mortgages this week was...[Includes one data table]

Delivery of FHA loans into Ginnie Mae pools declined 21.6 percent in the fourth quarter from the previous quarter, with correspondents accounting for the bulk of FHA loans securitized during the period, according to an Inside FHA/VA Lending analysis of Ginnie Mae data. FHA loans securitized in Ginnie mortgage-backed securities totaled $57.8 billion in the fourth quarter. Approximately $40.6 billion were purchase loans, down 20.6 percent from the previous quarter. MBS backed by FHA refinance loans totaled $17.2 billion, down 23.9 percent from the prior quarter. Correspondents and retail lenders accounted...[Includes two data tables]

Commercial banks and savings institutions continued their buying spree in the MBS market during the fourth quarter of 2015, according to a new ranking and analysis by Inside MBS & ABS. Banks and thrifts held a record $1.644 trillion of residential MBS in their available-for-sale and held-to-maturity portfolios as of the end of last year. That was up 2.2 percent from the third quarter and represented a 6.8 percent gain over 12 months. All of the increase came...[Includes two data tables]

Mortgage originators selling loans into MBS last week likely were hit with “pair-off” fees from secondary-market investors who were expecting delivery of higher-yielding mortgages, a proposition complicated by the sudden downdraft in rates. As one secondary market executive noted: “A forward sale into an MBS is not a perfect hedge. Then again, nothing is a perfect hedge.” Originators that fund billions of dollars each quarter use...

The proposed fiscal year 2017 Ginnie Mae staff budget will meet current operational needs, but staffing for the long term will have to be reevaluated, according to GNMA President Ted Tozer. Tozer said the proposed agency budget of $23 million for personnel costs, “along with leveraging contractors and carefully prioritizing hires,” will meet the agency’s current needs. However, officials will take a hard look at its staffing requirements “from a long-term, strategic point of view,” he noted. Tozer was reportedly disappointed...

Issuers and investors involved in the securitization market are pushing the Basel Committee on Banking Supervision to revise its proposed capital standards for “simple, transparent and comparable” securitization. The BCBS issued a proposal in November and the comment period closed this month. The Structured Finance Industry Group reiterated concerns about international regulatory efforts that will create a “patchwork” of standards and limit securitization, while others pushed back on the exclusion of synthetic transactions from the proposed criteria for STC transactions. “We continue...

Late last week, Moody’s Investors Service published an analysis detailing risks from mortgage warehouse securitizations. The warning was published days after a $225.0 million deal from Jefferies Funding was issued with a Aaa rating from Moody’s. Analysts at Moody’s stressed that securitized mortgage warehouse facilities face risks that differ from traditional residential MBS. The analysts said Station Place Securitization Trust 2016-1 from Jefferies addressed the risks, prompting the Aaa rating. Station Place was backed...