Among the many challenges associated with the Consumer Financial Protection Bureau’s pending integrated disclosure rule is expanded legal liability for lenders based on the more threatening Truth in Lending Act, as opposed to the more palatable liability framework of the Real Estate Settlement Procedures Act. During a webinar sponsored last week by Inside Mortgage Finance, Rich Horn, a partner with the Dentons law firm and one of the architects of the rule while a regulator at the CFPB, noted there is no private right of action for integrated disclosures under RESPA. On the other hand, with TILA liability, “there is...

The recent adoption by the Securities and Exchange Commission of its Regulation AB II disclosure rule is expected to be a “credit positive” for the auto loan and lease ABS sector, but it probably will also raise costs for market participants and, ultimately, consumers, according to an industry consensus of the new rule. The new regulatory regime mandates standardized loan-level disclosures for ABS backed by auto loans and leases, as well as other classes, as reported previously. The loan-level data have to be provided on the SEC’s free online database known as the EDGAR system. Although specific data requirements vary by asset class, the new asset-level disclosures generally will include...

Investors are paying up for distressed mortgages these days, fueling talk that the market might see more in the way of securitizations. “Buyers of non-performing loans want to securitize,” said Brian Dunn, senior vice president of MountainView Capital Group. “They like the [real estate mortgage investment conduit] structure.” According to Dunn, the securitization of nonperforming mortgages “has taken off...

Commercial banks held $1.386 trillion of residential MBS at the end of June, marking their second consecutive quarterly gain in MBS investment, according to a new Inside MBS & ABS analysis. The 0.7 percent increase in bank MBS holdings was enough to offset a 3.5 percent drop in thrift investment in the sector. On a combined basis, banks and thrifts saw an 0.3 percent increase in residential MBS during the second quarter, though the industry remained 0.2 percent below the level set at the midway point in 2013. All of the increase came...[Includes two data charts]

Ever since the housing bust, mortgage bankers have coveted the Ginnie Mae “eagle,” which allows them to issue and service the agency’s MBS, but the pipeline of new applications is slowing. According to figures provided to Inside MBS & ABS, the agency had received 78 new applications through the end of July compared to 89 in fiscal 2013 and 99 the prior year. In an interview with this newsletter, Ginnie President Ted Tozer acknowledged the decline in applications, but didn’t seem all that concerned, adding: “I think we received a bunch recently.” In other words, applications could wind up...

The Securities and Exchange Commission this week unanimously approved a final rule covering registration and disclosures for asset-backed securities, including new non-agency mortgage-backed securities. The so-called “Reg AB2” measure requires significant changes for new non-agency MBS, including loan-level disclosures and a three-day waiting period before issuing new deals. “The SEC must protect investors in asset-backed securities just as it does investors in any other security ...

Roughly $1 billion in damages will flow through to the FHA and Ginnie Mae from Bank of America’s record $16.65 billion global mortgage-backed securities settlement with the Department of Justice. Although most of the DOJ’s case centered around faulty private-label MBS that BofA and its forbears (namely Countrywide and Merrill Lynch) underwrote during the housing boom, a small piece of the settlement is tied to servicing chores that the bank did for Ginnie Mae. And apparently, BofA didn’t do a very good job of servicing the underlying product. The bank took over as the subservicer on roughly $26.2 billion in mortgage servicing rights that once belonged to Taylor, Bean & Whitaker, a large nonbank based in Ocala, FL. When TBW went bust in the second half of 2009, BofA was given the subservicing contract. “BofA serviced the loans for us,” said Ginnie Mae president Ted Tozer. “And they did a ...

Potential investors in non-agency MBS are calling for significant changes to the market before they’re willing to resume investing in new non-agency MBS. Non-agency MBS issuers indicate that they are willing to make some changes to attract investors, while other adjustments will require action by federal regulators or Congress. In June, the Treasury Department requested comments on how to increase non-agency activity and decrease the agency MBS share of mortgage financing. The comment period closed late last week, with about 25 industry participants submitting feedback. John Gidman, president of the Association of Institutional Investors, said...

MBS investors have been enjoying a nice little rally of late thanks to what analysts call “geopolitical” concerns, namely the conflicts in Ukraine and the Middle East. But how much further will bond prices rise and rates fall? It all depends on whom you ask. “We’ll see 2 percent on the long bond before 3 percent,” said Christopher Whalen, senior managing director of Kroll Bond Rating Agency. Over the past few weeks, MBS prices – based on the Fannie Mae 3.5 percent coupon – have neared...

Investor demand for re-performing loans has been so strong in recent months that some firms are sitting on the sidelines as yields have become unattractive. Re-performing loans are being sold both as whole loans and in non-agency MBS, largely without ratings. William Gorin, director and CEO of MFA Financial, said the real estate investment trust has been investing in unrated non-agency MBS backed by re-performing loans that were originated between 2005 and 2007. “The average credit support is...