A federal judge in New York has given the go-ahead for a group of investors in an IndyMac Bank MBS offering to proceed as a class in a suit against Credit Suisse, the offering’s underwriter. The June 29 ruling by U.S. District Judge Lewis Kaplan granted a December 2010 request for class certification to investors as they allege Credit Suisse misled them about the quality of toxic loans underlying a $642 million MBS offering in 2006. The plaintiffs claim in their suit that the sale of the MBS, Residential Asset Securitization Trust 2006-A8, sponsored by IndyMac Bank, violated the Securities Act of 1933 because the offering falsely represented that the underlying mortgage loans were originated in accordance with IndyMac’s underwriting standards.

Moody’s Investors Service is warning that the booming market for subprime auto ABS is poised to potentially overheat as growing demand could push lenders to loosen underwriting standards to boost volume, repeating what occurred during the 1990s. A recent Moody’s report cites emerging parallels between the U.S. subprime auto lending mar-ket today and the early 1990s when investor capital flocked into the sector by charging high loan rates while enjoying low funding costs. When the ‘90s lending boom went bust, net losses in subprime auto ABS jumped from under 3 percent in early 1995 to over 10 percent in 1997, according to Moody’s.

Loan modifications performed on mortgages in bank portfolios perform much better than mods on mortgages included in non-agency mortgage-backed securities, according to an analysis by Inside Nonconforming Markets of new data from the Office of the Comptroller of the Currency. The performance varies significantly even as the two types of non-agency mortgages receive the vast majority of principal reduction loan mods. The 12-month re-default rate on mods implemented from 2008 through the first quarter of 2011 was ...

Relatively few repurchase demands on mortgage loans backing non-agency MBS were resolved during the first quarter of 2012, according to a new Inside MBS & ABS analysis of disclosure filings made by 34 securitizers. The securitizers reported that a total of $29.03 billion of loans were in some stage of the process following demands that the mortgages be repurchased because of breaches of representations and warranties by the originator of the loans. But of that amount, some $28.62 billion – 98.6 percent of total activity – were classified...(includes one data chart)

The Federal Housing Finance Agency’s case against UBS Americas will serve as a test case in a series of lawsuits the agency filed in connection with non-agency MBS purchased by Fannie Mae and Freddie Mac, a Manhattan federal district court ruled last week. In a June 13 decision, Judge Denise Cote of the U.S. District Court for the Southern District of New York denied UBS’s request that it should not be the first of 17 cases to proceed because it is not a loan originator and was not accused of fraud. According to the court, UBS was the best test case because the number of securitizations and...

The outstanding volume of single-family agency MBS continued to grow during the first quarter of 2012, accounting for a slightly larger share of the overall mortgage market. Total agency MBS edged up 0.6 percent from the end of 2012 to reach $5.381 trillion – still slightly below the record of $5.430 trillion set at the end of 2009. The agency MBS market declined in early 2010 as Fannie Mae and Freddie Mac began buying distressed home loans out of MBS pools. While the agency MBS market was up in the first quarter, the amount of home mortgage debt outstanding continued to decline, dropping...(Includes one data chart)

Moody’s Investors Service announced last week that it is reviewing $47.5 billion in outstanding non-agency mortgage-backed securities for possible rating action. In a change of pace, however, most of the securities are being reviewed for potential upgrades. A whopping 78.3 percent of the combined subprime, Alt A, option ARM and jumbo MBS in question could potentially be upgraded. “The upgrade reviews are due to significant improvement in collateral performance and/or faster-than-expected pay-down on ...

Last week’s launch of the RMBS Working Group’s website demonstrated that government investigators see Wall Street insiders as a valuable source of information to detect and prove fraud and other misconduct in the packaging of mortgage securities. “Fraud can be hard to uncover without help from whistleblowers who were corporate insiders,” the task force said on the website. Whistleblowers can get rewards of up to 30 percent of the government’s monetary recovery based on the specific information, as well as protection from retaliation. The inclusion of a whistleblower provision in the Dodd-Frank Act has...

Most of the non-mortgage securitization market seems to be approaching the more normal levels that were seen prior to the financial crisis, according to market participants, analysts and observers gathered for the annual meeting of the American Securitization Forum this week in Washington, DC. “We’ve come a pretty long way, if you think about 2008, pre-2008 and post-crisis,” said Bob Behal, principal with The Vanguard Group. He noted that there have been healthy pricing levels in auto loan and credit card ABS and more active student loan and container sectors, as well as some interesting niche products and...

The Federal Deposit Insurance Corp. late last week filed separate lawsuits against a number of companies that issued or underwrote non-agency MBS purchased by Citizens National Bank and Strategic Capital Bank, two Illinois banks that failed in May 2009. The two banks purchased some $140.5 million of non-agency MBS issued by Bear Stearns, Citicorp, Credit Suisse and Merrill Lynch. The lawsuits also name JPMorgan Securities, Citigroup, Credit Suisse, Deutsche Bank, Ally Securities, HSBC Securities, RBS Securities and UBS Securities as underwriters of these transactions. The FDIC is seeking $77.0...