Ginnie Mae securitization of jumbo mortgage loans with a VA guaranty rose significantly in 2015 despite a volume drop-off in the fourth quarter, according to Inside FHA/VA Lending’s analysis of agency data. Year-over-year results saw an almost 60 percent increase in Ginnie Mae mortgage securitization backed by VA jumbo loans. This was slightly dampened by 17.1 percent drop in VA MBS production in the fourth quarter from the previous quarter. All top-five VA jumbo securitizers – Wells Fargo, Freedom Mortgage Corp., PennyMac Corp., U.S. Bank, and Quicken Loans – reported significant drops quarter-over-quarter and year-over-year. Wells Fargo delivered a total of $5.0 billion in VA jumbo loans into Ginnie pools, making it the leading jumbo securitizer in that segment. This accounted for 17.7 percent of the market. Freedom Mortgage ended the year with $2.1 billion in ... [ Charts ]

Issuers of publicly-registered ABS are adjusting to so-called Regulation AB2 requirements established by the Securities and Exchange Commission, but observers say the pro-investor rules have increased issuer costs and slowed issuance. One of the biggest challenges for issuers from Reg AB2 has been the requirement for an asset-representations reviewer. The rule requires publicly-registered MBS and ABS to include an asset-representation reviewer whose work can be triggered by a certain level of delinquent assets in a pool or by an investor vote. Susan Thomas, the associate general counsel of Ford Motor Credit Company, said...

A lack of demand from investors continues to stymie efforts to revive issuance of non-agency MBS. While issuers have made concessions to potential investors, wide gaps remain in various areas. Some of the frustrations were discussed last week at the ABS Vegas conference produced by Information Management Network and the Structured Finance Industry Group. Diane Wold, a managing director at Two Harbors Investment, said that while non-agency MBS investors have repeatedly called for increased disclosure, issuers’ disclosure efforts sometimes go unnoticed. The Securities and Exchange Commission requires issuers to disclose results from third-party due diligence reviews at least five days before a non-agency MBS prices. The disclosures offer extensive loan-level details and are required for both publicly-registered deals and private ...

There’s got to be a better way for investors in non-agency MBS to communicate with each other than taking out ads in the Wall Street Journal, according to various attendees at the ABS Vegas conference produced by Information Management Network and the Structured Finance Industry Group. Owen Cyrulnik, a partner at the law firm of Grais & Ellsworth who has represented investors in buyback disputes, said non-agency MBS investors that have wanted to force buybacks have been “paralyzed” by the voting requirements in most non-agency MBS. The deals typically require a certain share of investors in an MBS – at least 25 percent of investors in many cases – to approve of actions. “It was literally impossible to find other certificate holders,” ...

Fannie Mae and Freddie Mac are wading into the testing phase for the Single Security initiative for to-be-announced MBS, and they agreed on common names for the new product. The first-level securities – the equivalent of Fannie’s MBS and Freddie’s participation certificates – will be called “Uniform MBS.” The second-level deals – replacing Fannie’s Megas and Freddie’s Giants – will be known as “Supers.” Fannie has already registered the trademarks for these names. It appears that domain names for both, at least the .com variety, have been grabbed up. Both government-sponsored enterprises continue to prepare for conversion, and Common Securitization Solutions continues to release software for system-to-system testing, according to the Federal Housing Finance Agency’s 2015 Scorecard Progress Report released late last week. These ...

Real estate investment trusts that focus on residential MBS continued to pare their investments in the fourth quarter, a trend that may last through the remainder of the year. Interest rate volatility and continued reports of “illiquidity” in the MBS market remain key factors plaguing the sector. Still, prices for agency product remain strong and, as Inside MBS & ABS noted recently, commercial banks and thrifts continue to add to their holdings, which reached a record $1.643 trillion at yearend 2015. The 16 public mortgage REITs tracked by this publication held $233.17 billion of MBS at year-end, 92.4 percent of which included Fannie Mae, Freddie Mac and Ginnie Mae product. The non-agency market continues to shrink as legacy nonprime securities ...

In another legacy residential MBS legal action, the California Public Employees’ Retirement System this week reached a record $130 million settlement with Moody’s Investors Service over the ratings service’s allegedly erroneous ratings of AAA-rated structured investment vehicles in the run-up to the financial crisis. Back in 2009, CalPERS sued Moody’s – along with Standard & Poor’s and Fitch Ratings – after the pension fund claimed massive losses from investments in three structured investment vehicles that depended on the liquidity of assets that proved to be illiquid, such as subprime MBS, collateralized debt obligations and other ABS. In the lawsuit, CalPERS accused Moody’s of making “negligent misrepresentations” by assigning its highest credit rating to the investments. This caused significant losses as the market ...

Falling oil prices may have little impact on residential MBS even if distressed prime jumbo borrowers in oil-producing states were to default on their loans, according to Standard & Poor’s. The rating agency’s optimistic conclusion may be good news to investors concerned that job cuts in the oil industry will lead to high default rates among prime jumbo borrowers, particularly in states where a high percentage of workers are in oil production. Market information suggests that values of prime jumbo MBS in oil-producing states are being affected, as the market factors in the risk of losses arising from borrower defaults in these regions, the S&P report said. However, it is unclear whether the additional spread on MBS with high concentrations ...

Ginnie Mae securitization of rural home loans declined in 2015 as securitization volume in the segment fell in the fourth quarter, according to an Inside FHA/VA Lending analysis of Ginnie Mae data. A total of $18.1 billion in USDA loans were securitized in 2015, with the top five issuers accounting for $10.2 billion delivered into Ginnie (based on numbers below) MBS pools. Some $4.5 billion of MBS backed by rural home loans with the U.S. Department of Agriculture guarantee were issued in the fourth quarter, down 12.5 percent from the previous quarter. USDA MBS issuance also dropped 9.0 percent in 2015 from 2014 volume levels, with all of the top five issuers losing ground year-over-year as well as in the fourth quarter. Chase Home Finance remained the top issuer of securitized rural home loans, accounting for $5.6 billion in Ginnie MBS issuances last year. Second-place Wells Fargo, ... [ 1 chart ]

Jefferies Funding is underwriting a securitization of a revolving warehouse facility for agency mortgages originated by two nonbanks. The $225.0 million Station Place Securitization Trust 2016-1 received provisional Aaa ratings this week from Moody’s Investors Service. The rating service said the transaction is based on a “back-to-back” repo structure, with the three classes of notes scheduled to be paid off one year after issuance. The proceeds from the sale of the notes will be used by the issuer to purchase eligible mortgages and participation certificates from the repo seller. The revolving warehouse facility will be sponsored...