As a group, commercial banks and thrifts ended the second quarter of 2018 with slightly reduced holdings of single-family MBS, although several institutions raised their stakes in the market significantly, according to a new Inside MBS & ABS analysis and ranking. [Includes two data charts.]

The average daily trading volume in agency MBS fell to $204.1 billion in July, the weakest reading of the year, according to the Securities Industry and Financial Markets Association.

Ginnie Mae officials described a two-pronged approach to assuring MBS investors that the agency is protecting their interests from the risk that issuers might fail to deliver principal and interest payments in a timely manner.

The Mortgage Bankers Association called upon Congress to pass legislation to restore Ginnie Mae eligibility for so-called orphaned VA loans, which have caused a temporary disruption in the government-backed secondary market. In written testimony to the Senate Committee on Veterans’ Affairs last week, the MBA urged lawmakers to make technical corrections to restore the eligibility of certain Interest Rate Reduction Refinance Loans for pooling. The MBA estimated the VA orphan loan mess at roughly $500 million. Due to new loan seasoning requirements in the recently enacted Economic Growth, Regulatory Relief, and Consumer Protection Act, sime IRRRLs were rendered ineligible for Ginnie MBS pools. The loans were in transit when legislation addressing the problem of VA loan churning and serial refinancing became law in May. The new law’s seasoning provisions turned out to be ...

Fewer rural single-family mortgages and modified home loans with a USDA guarantee were securitized during the first six months of 2018 compared to last year. Delivery of USDA loans into Ginnie Mae pools over the last two quarters totaled $8.6 billion, down 10.1 percent from the same period last year but up 12.4 percent in the second quarter from the prior period. PennyMac topped all USDA issuers with $1.7 billion worth of rural housing MBS issued during the first half of 2018, up 22.1 percent year-over-year. New issuance also rose 30.0 percent in the second quarter from the previous quarter, enough for a 20.2 percent share of the securitized USDA market. ... [chart]

Refinances of outstanding single-family rental securitizations are accounting for a growing share of new issuance. The trend has been prompted, in part, by home price appreciation, which has made it more difficult for some firms to source new properties. Some $4.41 billion of single-family rental securities were issued in the first half of 2018, according to Inside MBS & ABS. Blackstone Group’s Invitation Homes dominates the sector. The firm, which merged with Starwood Waypoint Homes ...

Mortgage originations have been trending lower but there’s still plenty of demand in the secondary market for new production, according to industry participants. There’s demand from both MBS investors and aggregators that package mortgages for securitization.

The mortgage industry this week continued to look for ways to resolve the VA streamline refi loan mess, which arose from the implementation of statutory seasoning requirements under the Dodd-Frank reform act, even as Ginnie Mae pointed to Congress to come up with a solution. At issue is approximately $500 million worth of “orphaned” VA Interest Rate Reduction Refinance Loans that are now ineligible for Ginnie Mae securitization. The Mortgage Bankers Association is asking Congress for a legislative fix but is also looking for other forms of relief. Pete Mills, MBA’s senior vice president of residential policy and member management, is trying to drum up investor interest in the orphan loans, which, for now, appear destined for the secondary “scratch and dent” market. More buyers could potentially generate higher bids for the loans and lower losses for nonbanks that could not deliver them ...

The average daily trading volume in agency MBS fell to $223.2 billion in June, a slight decline from the month prior, according to figures compiled by the Securities Industry and Financial Markets Association.

Non-agency MBS investors might not be aware of the differences in representations and warranties provided by issuers of new non-agency MBS, according to Fitch Ratings. In a recent report, the rating service noted that issuers are diverging from standard practices in terms of “full” rep-and-warrant frameworks.