Real estate investment trusts that specialize in residential MBS posted a slight increase in their agency MBS holdings during the second quarter of 2016, along with a drop in non-agency MBS. The 16 publicly traded mortgage REITs tracked by Inside MBS & ABS had a combined residential MBS portfolio of $234.65 billion at the end of June, a gain of 0.9 percent from the previous quarter. However, 11 of the institutions reported declining balances, including the two largest REITs at the top of the ranking. Two Harbors Investment reported...[Includes one data table]

Over the past week, two nonprime MBS deals came to light: a $138.89 million bond issued by Deephaven Residential Mortgage Trust and a $119.38 million security from Angel Oak Real Estate Investment Trust. Both deals were private placements backed by newly originated mortgages and underwritten by Wall Street veterans Credit Suisse and Nomura Securities. Although both were publicized this week, the transactions – which were not rated – closed...

One of the fastest-growing top-10 originators, loanDepot, this month came to market with a $150 million debt financing deal that portends good things for other firms looking to raise capital in a tough stock market. “The cost of money has really come down for nonbanks,” said consultant Paul Hindman. The privately held loanDepot disclosed...

In a somewhat uncommon occurrence, four law firms published a position paper late last week aimed at helping industry participants comply with pending risk-retention requirements for new commercial MBS. The paper was written by attorneys at Cadwalader, Wickersham & Taft; Dechert; Orrick, Herrington & Sutcliffe; and Sidley Austin. “The paper was authored...

Moody’s Investors Service has asked the U.S. District Court for the Southern District of New York to dismiss the remaining claim in a lawsuit alleging manipulation of credit ratings leading up to the financial crisis. In its motion to dismiss, Moody’s said that plaintiff Ilya Eric Kolchinksy’s second amended complaint fails to show that the rating agency used its electronic “ratings delivery service” to issue false ratings on MBS that later turned bad. In 2012, Kolchinsky, a former managing director at Moody’s, filed...

Ocwen Financial agreed to a consent order with the Washington State Department of Financial Institutions this week, which included a $900,000 fine. The consent order related to Ocwen’s use of offshore unlicensed affiliate companies to service mortgages on properties in Washington state. Going forward, Ocwen agreed to service Washington-based mortgages only through licensed entities and the state will not license foreign entities ... [Includes three briefs]

Major industry trade groups are asking FHA and VA to suspend proposed guidelines for energy-improvement loans and give stakeholders an opportunity to comment. In a joint letter, 11 trade groups warned that the proposed agency guidelines regarding Property Assessed Clean Energy (PACE) loans raises serious concerns that must be resolved before implementation of any PACE guidance. Prior to the issuance of the new guidelines, both FHA and VA prohibited the financing or refinancing if there was a lien other than the FHA-insured or VA-guaranteed mortgages. PACE programs are available in 19 states but most are in California. They provide financing for home improvements and clean-energy upgrades that would result in more efficient use of water and electricity, and ultimately savings for homeowners. The PACE obligation is repaid through a property-tax assessment, which takes a ...

Commercial banks and savings institutions continued to load up on residential MBS during the second quarter of 2016, pushing their investment in the sector to a new high, according to a new analysis and ranking by Inside MBS & ABS. Banks and thrifts reported MBS holdings of $1.684 trillion as of the end of June, a 1.4 percent increase since the previous quarter. These are long-term holdings in banks’ held-to-maturity and available-for-sale portfolios. The industry held another $46.02 billion of MBS in their trading accounts. Not surprisingly, all of the gain came in agency MBS, particularly pass-through securities issued by Fannie Mae and Freddie Mac. The industry’s aggregate holdings of these securities, $867.64 billion, were up 4.1 percent from the ...

Fitch Ratings released criteria for rating MBS backed by nonperforming loans late last week, saying it will cap ratings for such deals at “A” due to “the idiosyncratic and adverse-selection risk.” As mortgage performance has improved in recent years, issuance of MBS backed solely by nonperforming loans has been limited. However, Fitch said it considers a transaction as an NPL issuance if more than 10.0 percent of the collateral is 60+ days delinquent at the time of issuance. The rating service will require such MBS to meet a number of standards to receive a low investment-grade rating of “A” or “BBB,” including a sequential-pay structure and application of available funds to pay interest to the rated notes. “Absent these structural ...

With balances on non-agency MBS issued before the financial crisis falling to levels where clean-up calls can be initiated, clean-up call activity is rising with prospects for further growth. Rights to clean-up calls on non-agency MBS can typically be exercised when the outstanding balance of the MBS is lower than 10.0 percent of the original balance. The owner of the call rights (typically the master servicer) can purchase loans from the pool at par plus expenses and make a profit by selling or re-securitizing performing loans at a premium and retaining distressed loans to modify or liquidate. According to Bank of America Merrill Lynch, about 37 deals have been called this year totaling about $800 million in unpaid principal balance ...