The Federal Reserve’s MBS purchase party isn’t over – yet – but it looks like the nation’s central bank is getting nearer to the last call. Late last week, the Wall Street Journal reported that officials at the nation’s central bank have developed a strategy for dialing back their unprecedented level of support of the housing market. The plan involves reducing the amount of bonds the Fed buys “in careful and potentially halting steps,” the WSJ said, with the purchases varying on the read officials have of the job market and of inflation. And although the timing of the Fed’s wind-down is...

Although Redwood Trust’s soup-to-nuts approach to representations and warranties has dominated the fledgling recovery in jumbo mortgage-backed securities issuance, some experts think a shorter term alternative may gain popularity among issuers. It’s important for investors and rating services to anticipate putbacks in jumbo MBS, Peter Sack, a managing director at Credit Suisse, said during a panel session at the recent secondary market conference sponsored by the Mortgage Bankers Association ...

Issuers of non-agency mortgage-backed securities should disclose when they seek a rating from a firm and ultimately decide not to hire the firm, according to a variety of non-agency participants. “If one rating is 7 percent subordination and the other is 15 percent, we don’t need to accept the 15 percent subordination, but we do need to disclose the 15 percent subordination opinion to investors,” Martin Hughes, CEO of Redwood Trust, said this week at a roundtable hosted by the Securities and Exchange Commission ...

Investors in subordinate tranches of recently issued non-agency jumbo mortgage-backed securities have seen strong returns on the investments. Real estate investment trusts have focused on the assets, which are likely to be subject to risk-retention requirements going forward. “We like the loan assets and the ability to diversify our funding in this manner where we don’t have a duration gap, there is no margin risk, and the assets and liabilities amortize and prepay at the same rate, eliminating the need for ...

Redwood Trust has recently put an increased emphasis on acquiring purchase mortgages. The loans have higher loan-to-value ratios than refinances included in Redwood’s non-agency mortgage-backed security issuance, a potential concern according to Kroll Bond Rating Agency. Redwood said it acquired $955 million in purchase mortgages from its correspondent lenders in the first quarter of 2013, up from $550 million the previous quarter. The purchase-mortgage share of Redwood’s acquisitions is also increasing ...

After years of holding onto investments in non-agency mortgage-backed securities even as prices declined significantly, the government-sponsored enterprises are preparing to sell some of their $101.5 billion in non-agency MBS holdings. Freddie Mac is offering $1.0 billion in non-agency MBS for sale with plans to unload as much as $5.0 billion this year, if pricing for the securities remains strong. A spokesman for the GSE said the sales are part of an effort to meet goals set by ... [Includes one data chart]

FHA jumbo loan originations increased in the first quarter of 2013 as well as from the same period last year pending hikes in the mortgage insurance premium and the required downpayment on loans above $625,500, according to Inside FHA Lending’s analysis of FHA data. FHA jumbo lenders produced an estimated $5.44 billion in loans over $417,000 during the first three months of the year, up 6.6 percent from the fourth quarter of 2012 and 14.0 percent higher compared to the volume from a year ago. Consumers continued to use the FHA jumbo product despite FHA’s decision to raise the annual mortgage insurance premiums on ... [2 charts]

Ginnie Mae officials have moved beyond whether they should consolidate the agency’s two MBS programs to how they should do it, but it remains much less certain that similar proposals to restructure the Fannie/Freddie market will take root. The newer Ginnie II MBS program has become significantly more popular than the original Ginnie I security, both in terms of new issuance and the outstanding supply of securities. Speaking at the Mortgage Bankers Association secondary market conference in New York this week, Ginnie President Ted Tozer said...

As more firms contemplate issuing jumbo MBS, there are growing concerns that there could be a few speed bumps along the way, namely rising whole loan prices, and an increase in the cost of money for investors that use swaps to fund their purchases of the AAA-rated tranches. The increase in whole loan prices is less of a concern, because it was somewhat anticipated given the “hot” nature of the market. Over the past few months, prices for jumbo whole loans have risen to as high as 103, compared to 101 and 102 last year. Craig Cole, a jumbo consultant and a former top production manager at Union Bank, San Francisco, told...

Standard & Poor’s was the most active rating service in the non-mortgage ABS market during the first quarter of 2013, according to a new Inside MBS & ABS analysis, while DBRS continued to dominate the non-agency MBS space. S&P rated a total of $31.9 billion of newly issued ABS during the first three months of the year, or 67.8 percent of total issuance. That was up from the company’s 58.1 percent share of ABS ratings for all of 2012. S&P was particularly strong in rating credit card ABS, covering 86.1 percent of that market after grading just 50.3 percent of last year’s card deals. Because nearly all public deals have multiple ratings, the sum of the ratings by firms exceeds...[Includes two data charts]