The dispute around an $8.5 billion settlement between Bank of America and non-agency MBS investors may be at an end after a New York state appeals court signed off on the deal. The agreement would mean a quick end to a lengthy legal battle over a settlement that was first announced on June 28, 2011. It also means the agreement could become the template for all representations-and-warranties settlements with large institutional investors, analysts said. BofA agreed...

Over a fifth of the loans securitized last year by Fannie Mae, Freddie Mac and Ginnie Mae do not meet one of the key criteria of the qualified-mortgage standard that came into effect in January 2014, and instead rely on an exemption for agency loans. During 2014, the three agencies securitized $198.3 billion of home loans with debt-to-income ratios exceeding 43.0 percent, according to a new Inside MBS & ABS analysis of loan-level disclosure data. That represented 21.5 percent of total MBS issuance by Ginnie and the two government-sponsored enterprises. The Consumer Financial Protection Bureau requires...

The representations and warranties used in jumbo MBS can sufficiently handle some breaches but fail to completely protect investors, according to Moody’s Investors Service. In a report released this week, the rating service noted that issuers use two main varieties of reps and warrants: those that allow for an open-ended review of loans and those that employ a prescriptive framework. The open-ended reviews are seen in jumbo MBS from Redwood Trust, WinWater Home Mortgage and others...

Banks have retained a significant volume of newly originated jumbo mortgages and even certain conforming loans in recent years, but analysts at Deutsche Bank Securities stress that the “conventional wisdom” regarding bank demand for MBS is wrong. “Despite anecdotal evidence of banks retaining more whole loans – they are more and more reliant on MBS as a percentage of their overall exposure to residential mortgages than they have been at any point in the past 15 years,” the analysts said in a report released last week. Bank demand for MBS holdings has increased...

Credit unions aren’t major players in the MBS market, and their aggregate holdings declined slightly in 2014, according to a new Inside MBS & ABS analysis of call-report data. Credit unions held $101.3 billion of residential MBS in portfolio at the end of last year. That was down 2.4 percent from the third quarter, and off 3.8 percent from the end of 2013. Most of the industry’s MBS holdings (97.4 percent) were...[Includes one data chart]

Agency single-family MBS issuance rose 2.8 percent in February on the back of a huge increase in securitization of seasoned home loans at Freddie Mac, according to a new Inside MBS & ABS ranking and analysis of loan-level MBS data. Fannie Mae MBS issuance fell 3.2 percent from January to February, and Ginnie Mae production was down 12.8 percent. But Freddie Mac issuance jumped by $7.05 billion from January’s level, a gain of 30.8 percent in a month. Freddie securitized...[Includes two data charts]

Nationstar Mortgage has filed a $1 billion shelf registration with the Securities and Exchange Commission, signaling its intention to sell debt securities and other instruments to the general public. But whether the lender/servicer actually uses the shelf is another matter entirely. “The mixed shelf is the company’s first amendment or filing of a new registration statement since May 2013,” noted analyst Kevin Barker of Compass Point Research & Trading. A mixed shelf means Nationstar could issue debt, preferred and common stock, as well as depository shares and warrants. Interestingly, the filing came...

Mortgage real estate investment trusts increased their holdings of residential MBS by 2.9 percent during the fourth quarter of 2014, according to data compiled by Inside MBS & ABS. Sixteen publicly-traded mortgage REITs reported a fair market value of $282.62 billion for their aggregate MBS holdings as of the end of 2014. That was up 6.7 percent from a year earlier. After diversifying into mortgage-servicing rights, risk-share transactions with the government-sponsored enterprises and other strategies, mortgage REITs are looking...[Includes one data chart]

One popular strategy among investors trying to profit from the woes of Ocwen Financial is to purchase subprime MBS tranches being serviced by the company and then declare a “material breach” in its servicing covenants. Speculators have been doing this while selling short Ocwen’s stock. According to analysts and investors familiar with the strategy – which is being employed by a fund called BlueMountain (and others) – subprime tranches can be bought at deep discounts. A material breach can occur when a rating agency downgrades the servicer, in this case Ocwen. For several weeks in January and February when Ocwen’s shares were plunging to new lows, it appeared...

Ginnie Mae plans to dispose of an estimated $5.3 billion in re-performing and nonperforming loans from a defaulted issuer’s portfolio following refusal by government auditors to sign off on the agency’s FY 2014 financial statement due to questionable accounting of the assets. Ginnie Mae President Ted Tozer said he hopes to dispose of the loans, which are part of $6.6 billion in non-pooled loan assets from the now-defunct Taylor, Bean & Whitaker Mortgage Corp.’s portfolio, within the year. Ginnie is currently managing the portfolio. According to a new Inspector General report, the $6.6 billion represented...