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...

Issuers and other participants in future structured-finance deals will face a higher hurdle of data quality expectations from Moody’s Investors Service, according to a new credit rating methodology the company put out this week. An important part of the initial rating analysis that Moody’s will perform of a structured security is an evaluation of the attributes of the assets that underlie it, the document said. “In assessing those characteristics, we typically use...

Issuers of jumbo mortgage-backed securities offered investors variety in two deals that closed last week and an MBS planned for next week. Separate jumbo MBS from WinWater Home Mortgage and FirstKey Mortgage were issued on Feb. 27. The $372.36 million WinWater Mortgage Loan Trust 2015-2 included two non-qualified-mortgages. Debt-to-income ratios above 43 percent caused the two loans to be deemed non-QMs, according to Standard & Poor’s ...

Most mortgage lenders reported solid increases in refinance originations during the fourth quarter of 2014, but the faltering purchase-mortgage sector still accounted for most of their business. A new Inside Mortgage Finance ranking and analysis reveals that refinance originations increased by 16.9 percent from the third to the fourth quarter. Based on securitization figures from Fannie Mae, Freddie Mac and Ginnie Mae, refi activity rose by a more modest 14.0 percent, although these data trail the primary market by one or two months. Meanwhile, purchase-mortgage originations were...[Includes five data charts]

The bid price for “flow” mortgage servicing rights is beginning to soften, having fallen from the peaks seen in the summer of 2014, according to both investors and certain advisors running the deals. But if a buyer of flow product is looking for bargains, it’s not likely to happen anytime soon. In other words, prices have drifted down, but are hardly cheap. In fact, a handful of sources contend that Nationstar Mortgage – one of the most active flow buyers of the past year – has ceased...

The European Commission last week requested comments on a framework for simple, transparent and standardized securitization that would apply to issuance in the European Union. A number of other non-U.S. regulators are considering similar proposals, prompting MBS and ABS participants in the U.S. to call for coordination among international regulators. The EC said its priority is to create a sustainable market for high-quality securitization without repeating the mistakes made before the financial crisis. “A high-quality EU securitization framework will promote further integration of EU financial markets, help diversify funding sources and unlock capital, making it easier for banks to lend to households and businesses,” the EC said. The European regulator stressed...

VA loan volume continued to rise in the fourth quarter of 2014, driven by low interest rates and a strong demand for the lower downpayment loans, according to an Inside FHA Lending analysis of Ginnie Mae/VA data. The volume of VA loans securitized in Ginnie Mae mortgage-backed securities rose 4.0 percent in the fourth quarter to $107.8 billion from the previous quarter, with more than half of the loans coming through the retail channel. Retailers accounted for $51.5 billion in VA loans securitized during the quarter while correspondents and brokers accounted for $44.4 billion and $11.9 billion, respectively. The overall average FICO score for VA loans was 707, with average loan-to-value and debt-to-income ratios of 95.0 percent and 38.2 percent, respectively, during the quarter. Correspondents came up big with VA purchase loans, accounting for $31.7 billion of the $65.1 billion in total purchase loans produced during the fourth quarter. Retail loan officers accounted for $28.5 billion while brokers brought in ... [ 1 chart ]

The FHA has delayed the effective date of new guidance that will require reverse mortgage lenders to perform a financial assessment of applicants for a Home Equity Conversion Mortgage. The FHA indicated that the change was necessary to allow vendors and the Department of Housing and Urban Development to align their respective software before the new system can be operational. Those familiar with the technology said delivering the required system enhancements should not take long. The FHA said a new effective date should be expected within 30 to 60 days of the original March 2 effective date. It will be announced in a new mortgagee letter, the agency added. The new guidance requires lenders to evaluate HECM borrowers’ willingness and capacity to meet their obligations and to comply with program requirements. “Financial assessment” means doing a much more ...

The Department of Veterans Affairs expects to have a finalized Qualified Mortgage (QM) rule by May to help clear up some issues that have arisen since the agency issued an interim final rule last spring. The VA issued the interim QM rule for comment on May 9, 2014, to define which VA loans will have QM status under the ability-to-repay (ATR) rule. Issued by the Consumer Financial Protection Bureau, the ATR rule provided temporary QM status to loans eligible for FHA insurance and guaranties by the VA and the Department of Agriculture’s Rural Housing Service. Eligible government-backed loans must be 30-year fixed-rate with no interest-only, negative amortization or balloon features. Total points and fees must not exceed 3 percent of the total loan amount for loans of $100,000 or more. Loans that meet the definition of a temporary VA-eligible QM are considered as in compliance with the ATR rule. They are designated as “safe harbor QMs,” provided they are not ...

BlackRock Financial Management plans to issue a unique ABS backed by peer-to-peer consumer loans originated via the platform established by Prosper Marketplace. Moody’s Investors Service assigned ratings to Consumer Credit Origination Loan Trust 2015-1 last week, noting a number of issues for investors to consider. The ABS is expected to have a balance of $344.85 million. The loan pool Moody’s examined had a balance of $306.71 billion as of the end of December. Approximately 14 percent of the total assets are expected to be added after closing. The deal doesn’t have a projected closing date yet, according to Moody’s. The rating service assigned...