Freddie Mac will begin creating new “mirror” securities that will play a key role in how the government-sponsored enterprise will allow investors to exchange existing Freddie participation certificates for new single securities. The mirror securities will be held in a Federal Reserve account and will not increase the outstanding principal balance of Freddie MBS, the GSE explained in an update on the exchange program. The mirror securities will track existing Freddie MBS but substitute a 55-day payment cycle for Freddie’s current 45-day cycle. When an investor exchanges part or all of an existing 45-day security for a new 55-day single security that’s interchangeable with Fannie Mae single securities, Freddie will pay...

Questions from Inside Nonconforming Markets prompted the Consumer Financial Protection Bureau to acknowledge last week that its director misspoke during a speech at the Mortgage Bankers Association’s annual convention. In arguing that the CFPB’s ability-to-repay rule hasn’t caused a significant reduction in mortgage originations, Richard Cordray said last week that “most” jumbo loans are non-qualified mortgages. While comprehensive data on the non-QM share of jumbo mortgages is not available, a number of data sources suggest that most jumbos are in fact QMs, not non-QMs. Three of the five largest jumbo lenders told...

A typical jumbo mortgage-backed security is stronger in many ways than the non-agency MBS-like transaction Freddie Mac issued at the end of July, according to a recent analysis by Andrew Davidson & Co. However, the Freddie deal benefitted from a wrap provided by the government-sponsored enterprise. Freddie Mac Whole Loan Securities Trust Series 2015 SC01 was backed by mortgages with an unpaid principal balance of $302.96 million. The risk-sharing transaction was structured as a cash securitization with $278 million in senior certificates guaranteed by Freddie and approximately $23 million in unguaranteed subordinate certificates. Andrew Davidson compared...

Citadel Loan Servicing, Irvine, CA, one of the most active nonprime residential lenders in the market, is on track to fund a company-record $400 million worth of mortgages this year, more than double what it produced last year. In a brief interview with Inside Nonconforming Markets this week, company founder and CEO Dan Perl said his goal for next year is $1 billion – all in loans that do not meet the qualified-mortgage standard. If the privately held Citadel – Perl is the chief shareholder – can hit...

A number of factors are making new MBS in the to-be-announced market less attractive to investors than MBS issued a few years ago, according to a report from Deutsche Bank Securities. “Aggressive servicers keep picking up market share, credit quality keeps softening and loan balances edge up,” the analysts said. “It adds up to declining quality for TBA MBS.” While those trends certainly aren’t new, Deutsche Bank said...

The non-agency MBS market sputtered to its weakest new issuance volume in a year during the third quarter of 2015, according to a new market analysis and ranking by Inside MBS & ABS. A total of $9.43 billion of non-agency MBS were issued during the third quarter, down 39.7 percent from the second quarter. Thanks to a strong start in the first half of 2015 – and weak new issuance during the same time last year – year-to-date production was up 47.5 percent from the first nine months of 2014. The two mainstays that have been propping up non-agency MBS issuance have been...[Includes two data tables]

Nonbanks comprised a significant portion of Ginnie Mae business as independent mortgage companies replaced banks as primary securitizers of FHA and VA loans. In the third quarter of 2015, mortgage companies accounted for 60.8 percent of VA loans and 67.1 percent of FHA loans securitized in Ginnie pools. For mortgage companies, production of Ginnie mortgage-backed securities backed by FHA loans increased by 5.0 percent in the third quarter from the previous quarter and was up a whopping 118.1 percent during the first nine months of 2015 over the same period last year. Nonbank securitization of VA loans rose by a modest 1.5 percent quarter over quarter and by 83.6 percent over the nine-month period compared to the same period last year. Megabanks, whose assets exceed $1 trillion, were the second largest issuers of Ginnie Mae MBS, accounting for less than ... [3 charts]

Recent disappointing job creation numbers and continued concern about slowing economic activity around the globe have convinced an increasing number of Wall Street analysts, participants and observers that the Federal Reserve’s Open Market Committee will not raise interest rates at its next meeting, scheduled for later this month. Further, more market professionals don’t predict an uptick in rates until sometime in 2016. And a few are even speculating a liftoff won’t come until the year after that. According to Peter Schiff, CEO and chief global strategist for investment firm Euro Pacific Capital, “the downright dismal September jobs report that was released last Friday may prove...

Fannie Mae and Freddie Mac saw a modest decline in the flow of home loans into their mortgage-backed securities programs during the third quarter of 2015, according to a new analysis and ranking by Inside Mortgage Finance. The two government-sponsored enterprises issued a total of $223.47 billion of single-family MBS during the third quarter, a 3.8 percent decline from the previous quarter. Freddie had a slightly larger downturn (4.1 percent) than Fannie (3.6 percent). Although overall MBS volume was down, lenders delivered...[Includes three data tables]

The average daily trading volume for agency MBS fell slightly to $187.6 billion in August from the prior month, the second lowest reading of the year, according to figures compiled by the Securities Industry and Financial Markets Association. Lower trading volume indicates that liquidity has been reduced somewhat, but there could be brighter days ahead: the eight-month daily trading average is a bit higher at $200.9 billion and if that figure holds for the rest of the year, it will surpass last’s year’s daily average of $177.9 billion. Then again, $200.9 billion wouldn’t be...