In what’s claimed to be the third-largest settlement of a class-action suit by investors in non-agency MBS, Royal Bank of Scotland agreed to pay $275 million in cash. Investors led by the New Jersey Carpenters Vacation Fund claimed that RBS did not disclose that loans included in Harborview MBS that it sold failed to meet the deals’ underwriting guidelines. The settlement is awaiting approval by U.S. District Judge Harold Baer in U.S. District Court for the Southern District of New York. Separately, the remains of Lehman Brothers settled...

Investors of all different stripes have been increasing their stakes in several publicly traded mortgage insurance firms of late, betting that this recovering corner of the residential finance industry has more gas in the fuel tank. Among those buying into MI stocks is Paulson & Co., the legendary hedge fund that made $15 billion by shorting publicly traded subprime firms via the ABX Index in the run-up to the housing bust. Paulson & Co. recently increased...

Issuers of non-agency MBS and agency mortgage sellers have addressed most of the legacy representation and warranty issues that have bedeviled the market for the past few years, according to industry analysts. However, repurchase and buyback issues haven’t been completely resolved as investors and regulators make last grasps at recoveries. Analysts at Compass Point Analytics & Trading estimated that the total losses incurred for rep-and-warrant claims from Fannie Mae, Freddie Mac, the Federal Housing Finance Agency, the FHA and non-agency MBS investors by publicly traded U.S. originators still in existence will total $89.0 billion. The analysts said lenders have charged off or reserved $88.0 billion for such losses. Compass Point said...

A policy shift at the Securities and Exchange Commission requiring admission of guilt in certain cases may encourage wrongdoers in the securities market to litigate rather than settle, resulting in fewer SEC settlements, according to some compliance attorneys. Fear of possible criminal prosecution and the lasting impact of an admission of guilt could compel accused companies and individuals to take their cases to trial rather than negotiate a settlement, warned Philip Stein and Jeremy Sahn, partners in the Miami-based law firm of Bilzin Sumberg. Starting in June 2013, the SEC began requiring...

Federal Reserve Chair Janet Yellen stuck close to the script of her predecessor on the subject of the Fed’s “quantitative easing” exit strategy during her first Humphrey-Hawkins appearance before Congress this week, reaffirming that the central bank’s pull-back from its asset-purchase program is likely to continue, barring a dramatic surprise. “Let me emphasize that I expect a great deal of continuity in the Fed Open Market Committee’s approach to monetary policy,” Yellen told the House Financial Services Committee on Tuesday. “I served on the committee as we formulated our current policy strategy and I strongly support that strategy, which is designed to fulfill the Federal Reserve’s statutory mandate of maximum employment and price stability.” The new Fed chief reminded...

Freddie Mac last week announced a $1 billion offering of its Structured Agency Credit Risk debt notes, the government-sponsored enterprise’s first risk-sharing transaction of 2014 and its third such deal since the company rolled out the STACR series last year. The deal is backed by a pool of $32.4 billion 30-year fixed-rate mortgages acquired by Freddie in the second quarter of 2013. More than 65 investors participated in Freddie’s latest STACR deal, and more than 20 of those investors were newcomers, according to Kevin Palmer, vice president of single-family strategic credit costing and structuring for Freddie. “We’ve introduced...

The jumbo mortgage-backed security market was dormant for over two months, but within the past 14 days, Credit Suisse issued a $287.42 million deal and JPMorgan Chase started shopping a $356.39 million issuance. That’s not to say the jumbo MBS market is back to full strength. The two deals have some unique characteristics, and banks still maintain their dominance over nonbank aggregators of jumbos. Officials at American Capital Mortgage Investment said jumbo MBS issuance has plenty of potential ...

The whistleblower whose investigative efforts led to the landmark $25 billion national mortgage settlement between the federal government, 49 state attorneys general and five of the largest mortgage servicers is at it again. This time, Lynn Szymoniak is suing 22 companies for using fraud to obtain FHA insurance – in some instances, VA guaranties – for defective loans that later were securitized through Ginnie Mae and sold to investors. Szymoniak, who is suing under the False Claims Act, gained notoriety from a 2011 interview on “60 Minutes” in which she ...

Speculators, in the form of “short-sellers,” are zeroing in on the mortgage industry, including some of the fastest-growing servicers of the past two years: Nationstar Mortgage, Ocwen Financial, and Walter Investment Management Corp. But one mortgage stock being shorted more than any of these is PHH Corp., the parent company of PHH Mortgage, the nation’s seventh largest originator. According to figures compiled by Standard & Poor’s, as of early February, speculators had sold short 17.2 million shares of PHH common. As a ratio of shares outstanding in PHH, this comes...[Includes one data chart]

Credit Suisse late last week broke a two-month lull in jumbo MBS issuance, and JPMorgan Chase appears to be planning a new security. However, the jumbo MBS market is far from flourishing as other issuers continue to avoid the sector. Credit Suisse issued a $287.42 million jumbo MBS last week. CSMC Trust 2014-IVR1 received a AAA rating from DBRS with credit enhancement of 6.85 percent on the top-rated tranche. The deal had...