Optimism in the non-agency MBS market’s recent extraordinary performance continues as investors look beyond legacy MBS to new transactions, such as Redwood Trust’s Sequoia jumbo securitizations, according to analysts. A recent analysis by Bank of America Merrill Lynch expects lower-yielding asset classes to push investors toward the non-agency MBS sector, where volumes are expected to remain at healthy levels for the rest of 2012. Analysts, however, noted...

Fixed-rate mortgages comprised most of August’s FHA production, which totaled $22.1 billion, up 13.2 percent from July and 37.9 percent from a year ago, according to an Inside FHA Lending analysis of FHA data. FRMs accounted for 98.9 percent of new loans with FHA insurance in August. In-house originations made up 79.6 percent of new endorsements while purchase loans accounted for 56.1 percent of FHA originations during the month. Wells Fargo is the only top FHA lender to exceed the billion-dollar mark. In fact, the bank reported $2.2 billion in new FHA originations, 76.0 percent of which were produced in-house. The purchase mortgage share of Well’s total FHA originations was ... [2 charts]

Top-tier, highly liquid consumer ABS are still attractive investments in today’s market, owing to strong technical factors and solid fundamentals, according to Barclays Capital. “Traditional consumer ABS continue to enjoy status as a safe haven asset class, especially in times of broader market volatility, and are an excellent cash surrogate for investors looking to put excess cash to work,” wrote research analyst Joseph Astorina, who cited the sector’s stable cash flow and ratings profiles, as well as consistent excess returns over swaps and Treasuries. In addition, this sector is...

A recent Congressional report confirms there’s been a jump in the drop-out rates for students at for-profit colleges, and that’s bad news for investors in the securitizations backed by loans to these students, according to market analysts. “A two-year investigation by the Senate Committee on Health, Education, Labor and Pensions demonstrated that federal taxpayers are investing billions of dollars a year – $32 billion in the most recent year – in companies that operate for-profit colleges,” said a report by the committee. “Yet, more than half of the students who enrolled in those colleges in 2008-09 left without a degree or diploma within a median of four months. That compares with 46 percent in a study by the Department of Education of a 2003-04 cohort, which itself reflected...

Chicago, Suffolk County, NY, and Berkley, CA, have joined the ranks of local governments considering the controversial notion of using eminent domain to seize performing underwater mortgages, restructure their terms and repackage them for sale to other private investors. “Given the size of the foreclosure epidemic in Chicago, the city should explore every possible avenue to keep families in their homes and reduce the number of vacant properties that breed crime and erode the stability of our neighborhoods,” Alderman Edward Burke, chairman of the city’s finance committee, said last week. In March 2012, nearly 667,000 Chicago-area homeowners were...

Stop advance rates by servicers of non-agency MBS are more than double industry estimates, based on new data from CoreLogic’s LoanPerformance. Analysts at Barclays Capital said the data also allow calculation of loan-level stop advance rates on non-amortizing loans for the first time. LoanPerformance recently started reporting loan-level stop advance data on approximately 700 non-agency MBS, about 13.0 percent of active deals, according to Barclays. While CoreLogic said the trustee-submitted data will be reported without reference to the specific servicer, Barclays determined that the data are primarily limited to deals by Countrywide Financial and Washington Mutual. Stop advance rates in recent months on the Countrywide-serviced deals range...

California remains the top source of new single-family mortgages for Fannie and Freddie, even as Fannie remains the dominant GSE in terms of production through the first half of the year, according to an Inside The GSEs analysis. A total of $132.2 billion of home loans on Golden State properties were securitized by the two GSEs during the first six months of 2012, accounting for 22.9 percent of their total business for the half year. That was up 46.7 percent from total California production during the first six months of 2011 as the overall GSE market rose 38.8 percent from a year ago.

The Federal Housing Finance Agency may pursue its residential mortgage-backed securities legal action against affiliates of Residential Capital LLC, Ally Financial’s defunct mortgage unit, a federal judge has ruled. Last week, Judge Denise Cote of the U.S. District Court for the Southern District of New York denied ResCap’s request seeking an automatic bankruptcy stay of its numerous MBS lawsuits, including one filed by the FHFA last year. The FHFA, as GSE conservator, sued UBS Americas in July 2011 alleging that billions of dollars of MBS purchased by Fannie and Freddie were based on offering documents that contained “materially false statements and omissions.”

Securitization representatives are forcefully pushing back against a proposal under review by three jurisdictions in California to use eminent domain to seize performing, underwater mortgages out of non-agency MBS pools, renegotiate them on terms more favorable to the borrowers, and repackage and sell them off to another group of private investors. Last Friday, a joint powers authority created by San Bernardino County and two of its cities, Ontario and Fontana, formally convened for the first time for an organizational meeting. Two groups that represent the securitization industry, the American Securitization Forum and the Securities Industry and Financial Markets Association, expressed their opposition during the meeting. The ASF said that “this inappropriate use of government power,” which is based on a plan by San Francisco-based Mortgage Resolution Partners, a private investment firm, was “designed...

Alleged manipulation of the London Interbank Offered Rate could have had a significant impact on investments in MBS and ABS, according to industry analysts. However, three weeks after Barclays Bank reached a settlement with regulators on LIBOR manipulation, major securities investors have yet to voice concerns about potential losses tied to the interest rate benchmark. Tom Deutsch, executive director of the American Securitization Forum, said he has not heard any “hubbub” from investors thus far about the impact of potential LIBOR manipulation. The Securities Industry and Financial Markets Association, the Association of Mortgage Investors and the Association of Institutional Investors did not reply to requests for comment on the issue. Laurie Goodman, a senior managing director at Amherst Securities Group, said it is unknown...