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...

Trustee responsibilities, the role of the government-sponsored enterprises, deal documentation, loan-level disclosures, servicing, ratings, assignee liability, regulatory uncertainty, lien priority, bondholder communication and incentives for banks. These are just a few of the issues that need to be addressed for non-agency MBS issuance to resume in a meaningful manner, according to industry participants. About 25 comment letters were submitted after a request from the Treasury ...

The Structured Finance Industry Group has proposed investor-friendly standards for non-agency mortgage-backed securities in an effort to increase activity in the sector. The first “green paper” on Project RMBS 3.0 focuses on representations and warranties, triggers for independent reviews and disclosure of underwriting guidelines. “The goal here is to produce a proposal for standards that we would hope the industry adopts,” said Richard Johns, SFIG’s executive director ...

Two industry trade groups expressed support for consolidating Ginnie Mae’s mortgage-backed securities program and creating a new MBS but they are at loggerheads on some of the details. Commenting on the Ginnie Mae proposal, the Securities Industry and Financial Markets Association (SIFMA) and the Mortgage Bankers Association (MBA) said the disagreements are mostly on how to resolve issues related to winding down the Ginnie Mae I MBS program and providing a conversion option for existing securities. “It is clear that further discussion is warranted, and direct engagement with key stakeholders should be beneficial,” the trade groups suggested. Ginnie Mae has received considerable support from a variety of industry players for its “straw man” proposal to shift to a single MBS program based on the existing Ginnie II. The program now accounts for more than 90 percent of all ...