Japan became the biggest overseas investor in U.S. MBS and ABS markets last year, moving past mainland China to head the ranking, according to final Treasury Department data. Japanese investors held $199.7 billion of U.S. MBS and ABS as of the midway point in 2012, the one time a year when Treasury releases detailed foreign holdings of U.S. long-term securities. That was up 21.3 percent from June 2011, when Japan held just $164.7 billion of MBS and ABS. The Japanese increased...[Includes one data chart]

Investors in vintage non-agency MBS could take $7.8 billion in losses due to previously undisclosed principal forbearance on top of the $1.0 billion in losses uncovered this month. However, a survey suggests that servicers don’t intend to pass the losses through to investors. The losses recognized in May were reported after Ocwen Financial took over servicing from Homeward Residential. Analysts warned that other servicing transfers could prompt similar losses. Bank of America Merrill Lynch said...

Participants in the non-agency mortgage-backed security market are concerned about the strength of the sector as interest rates and other pricing metrics have increased significantly in recent weeks. “When the 10-year Treasury rate started to rise recently and the mortgage interest rate spread out by 20 basis points, the non-agency MBS market spread out by 50 basis points,” said Lewis Ranieri, chairman of Ranieri Partners, at a forum hosted by the Bipartisan Policy Center last week. “And given there’s ...

Shellpoint Partners issued its first non-agency jumbo mortgage-backed security this week, which differs in a number of ways from non-agency MBS issued since 2010. The deal is an attempt to loosen – slightly – non-agency MBS underwriting standards, although the rating services were critical of the originator, New Penn Financial. Shellpoint Asset Funding Trust 2013-1 was initially planned as a $261.58 million non-agency MBS, according to presale reports issued last week. The deal was reportedly restructured ...

The preferences of investors and the rating services play a significant role in the characteristics of mortgages included in non-agency jumbo mortgage-backed securities, according to industry participants. “The rating agencies are a first part of the analysis, but investors in these bonds are paying very careful attention to these loan characteristics, to credit exceptions and to who the lenders are,” Peter Sack, a managing director at Credit Suisse, said this week at a webinar ...

An FHA proposal for new legislative authority to transfer servicing has raised concerns among industry participants, particularly in the Ginnie Mae market. Authorizing the FHA to shift mortgage-servicing rights from one servicer to another could have a ripple effect on Ginnie Mae servicing rights and also adversely impact state mortgage servicing and origination licenses, some say. The bottom line is that Congress should consider FHA’s request for new statutory authority with great care, said Larry Platt, a compliance attorney and a partner at the Washington law firm K&L Gates. “We would hope that ...

Deep-freezing the Home Equity Conversion Mortgage program’s full-draw, fixed-rate standard product apparently has not diminished borrowers’ appetite for reverse mortgages as indicated by a significant increase in HECM originations in the first quarter of 2013. FHA endorsements under the HECM program surged 36.2 percent during the first three months of 2013, with lenders reporting $3.84 billion at the end of the quarter, according to Inside FHA Lending’s analysis of FHA data. Volume was also up a modest 5.3 percent from the same period a year ago. The Department of Housing and Urban Development announced the ... [1 chart]

For the past two years, Bank of America has been the poster child of legacy servicing sales, but it may soon have some company. According to industry advisors who specialize in the mortgage servicing rights market, JPMorgan Chase and a few other large banks with seasoned portfolios are developing “deal teams” to explore their options. Chase’s name has surfaced from time to time as a select seller of legacy product. But it also has been a selective buyer of servicing, including the purchase last fall of $70 billion in rights from MetLife, which was closing out its interest in the mortgage business. A spokeswoman for Chase declined...

The Department of Housing and Urban Development is seeking additional authority from Congress to transfer FHA mortgage servicing in order to facilitate loss mitigation. The change would allow the FHA to require specific actions when a servicer is underperforming or has a low score on HUD’s Tiered Ranking System, including the transfer of servicing to an FHA-designated special servicer or requiring a servicer to enter into a sub-servicing agreement. With expanded powers, the FHA also may require a servicer to engage a third-party to assist in loss mitigation services. Such authority would enable the FHA to better avoid losses due to poor servicing and, thus, protect the MMI Fund, HUD said. Testifying before a Senate appropriations subcommittee, FHA Commissioner Carol Galante noted...

Private MBS investors will likely see reduced competition from the Federal Reserve later this year if the central bank begins to slow down its purchases of agency MBS, but there is also likely to be a sharp drop in new MBS supply at the same time. The Federal Open Market Committee made no changes in its policy of adding $40 billion a month to its massive $1.165 trillion portfolio of agency MBS, in addition to reinvesting payments from its agency debt and MBS holdings. It also promised to closely monitor economic and financial developments and stands prepared to increase or decrease its MBS purchases. But Fed Chairman Ben Bernanke later indicated...[Includes two data charts]