Separate appeals courts this week vacated legal victories that the federal government achieved in the aftermath of the financial crisis. The cases involve former officials at State Street Bank and Trust and a former MBS trader at Jefferies & Company. In 2014, commissioners of the Securities and Exchange Commission voted 3-2 to reverse a ruling by the SEC’s Chief Administrative Law Judge involving James Hopkins, a former vice president and head of North American product engineering at State Street, and John Flannery, a former CIO at the bank. The ALJ had dismissed...

Standard & Poor’s rated some $84.64 billion of non-mortgage ABS issued in the U.S. during the first nine months of the year, making it the top rating service in the segment, according to a new ranking by Inside MBS & ABS. S&P was well represented in all the major ABS sectors, with its strongest showing in credit card ABS, where it rated 73.4 percent of 2015 issuance based on dollar volume. Fitch Ratings was...[Includes two data tables]

The securitization of non-agency, nonprime residential loans appears to be heating up as 2015 draws to a close, but bond sizes continue to be – expectedly – quite small. Then again, that’s not the point of these deals, lending executives and investment bankers involved in the market, argue. The idea is to set the table by issuing securities backed by loans that fail to meet the qualified-mortgage test in the hope that, down the road, bond sizes will increase. Earlier this month, according to a report by Bloomberg, Lone Star Funds issued...

Industry analysts are generally optimistic that most of the large consumer ABS sectors will probably see a stable, positive year in 2016. However, they’re not very gung-ho about what kind of a year the government-backed student loan space is going to have. Analysts at Wells Fargo Securities think that consumer ABS should offer good relative value next year, based on solid credit fundamentals and robust structural protections. “We expect spreads to tighten in 2016 as the primary market recovers and the yield curve flattens along with Federal Reserve tightening,” they said in a recent outlook. “Spreads are likely to stay volatile and event-driven.” Further, “Weak demand and poor liquidity have been...

Two investment banking firms – Interactive Mortgage Advisors and MountainView Servicing Group – have at least $17 billion (combined) in mortgage servicing rights auctions in the works, a sign that the sector is heating up as the year draws to a close. Several other advisory firms have announced deals in the past few weeks, including The Prestwick Group and Mortgage Industry Advisory Corp. Also, sources contend that investment banker Houlihan Lokey is busy as well, though company officials there declined to comment for this story. Mark Garland, president of MountainView, said...

Fannie Mae and Freddie Mac have seen modest growth in programs launched early this year to serve downpayment-challenged borrowers, according to a new Inside Mortgage Finance analysis of loan-level data on agency mortgage-backed securities. Ginnie Mae has accounted for 94.5 percent of purchase mortgages with loan-to-value ratios ranging from 95.1 percent to 97.0 percent that were securitized by the three agencies during the first 11 months of 2015. Because LTV data is not available for all loans in Ginnie MBS, the agency’s actual share of these high-LTV loans is likely somewhat higher. Fannie and Freddie have established...[Includes one data table]

Fannie Mae, Freddie Mac and Ginnie Mae produced just $86.69 billion of single-family MBS during November, according to a new Inside MBS & ABS ranking and analysis. Last month’s production was down 19.1 percent from October’s volume and represented the weakest issuance since the agency MBS market started to take off in February of this year. All three agencies saw...[Includes two data tables]

A non-agency MBS sponsored by CarVal Investors issued this week includes a new fee-based compensation structure for one of the servicers involved in the $474.2 million transaction. Mill City Mortgage Loan Trust 2015-1 is backed by re-performing mortgages that had seasoned for nearly nine years, on average. Some 90.1 percent of the loans had received modifications and almost all of the mortgages in the deal were current at the time of issuance. Shellpoint Mortgage Servicing will service...

PIMCO led non-agency MBS investors in the filing of a class-action lawsuit against Citibank last week, alleging that Citi didn’t adequately perform trustee duties on MBS issued before the financial crisis. The lawsuit claims violations of New York’s Streit Act, which has been cited in several other lawsuits against trustees. PIMCO et al v Citibank was filed in New York’s state supreme court. Other investors involved in the filing include AEGON, Kore Advisors, Prudential and Sealink Funding Limited, and the plaintiffs aim to include all that have invested in 25 non-agency MBS where Citi is the trustee. The deals were issued...

Morningstar Credit Ratings proposed new criteria this week to rate residential MBS. The rating service published similar criteria in May but Morningstar has only rated one deal backed by new residential mortgages since then. The biggest addition in the proposed criteria details how Morningstar plans to handle transactions that include primary mortgage insurance. The provision could help Morningstar rate risk-sharing transactions from the government-sponsored enterprises. The rating service said...