A few months, back there was scattered talk in the market that a wave of consolidation might hit publicly traded real estate investment trusts that specialize in agency MBS. But thanks to continued low interest rates and the fact that mortgage REITs continue to trade below book value, such a rollup is looking highly unlikely. “I don’t see it happening,” said Credit Suisse analyst Doug Harter. “Why would you sell for below book value when you can just liquidate?” Jason Stewart, an analyst at Compass Point Research & Trading, agrees...

Regulators, rating services and investors are all targeting Ocwen Financial’s servicing of mortgages in non-agency mortgage-backed securities. Company officials responded by acknowledging some of the issues while strongly pushing back on others. Fitch Ratings and Moody’s Investors Service both recently downgraded Ocwen’s servicer ratings. When a servicer’s ratings fall below a certain level, non-agency MBS investors sometimes have the option to ...

The Mortgage Bankers Association notched a win for small, independent issuers after the Financial Accounting Standards Board agreed with the group’s position on the accounting of seriously delinquent loans in Ginnie Mae pools. At issue is whether companies that service pools with loans that are 90 days or more delinquent should put those loans on their balance sheet even if they have no intention of buying the loans out of the pool. According to the MBA, a Big Four accounting firm issued controversial guidance which would have been burdensome for small mortgage-backed securities issuers that have limited funding and no incentive or history of buying defective loans out of pools. After months of exchanges, FASB staff finally agreed with the MBA’s view that the decision process involves two steps. First, a loan must be 90 days or more delinquent and trigger ...

Freddie Mac is set to sell a first-loss tranche on a Structured Agency Credit Risk transaction for the first time. The deal priced this week and the $880 million STACR 2015-DN1 is scheduled to settle next week. On previous STACR deals, Freddie has retained a tranche equaling at least the first 30 basis points of loss. Investor demand for the government-sponsored enterprises’ risk-sharing transactions has been strong but some have called for the GSEs to offer first-loss tranches, which can offer higher yields than the tranches that are more buffered from losses. Freddie said...

Ocwen Financial may have to settle with investors in non-agency MBS it services to avoid having the underlying servicing rights being yanked away by a trustee, according to investors and analysts tracking the situation. Early this week, Ocwen attorney Richard Jacobsen sent a letter to the law firm of Gibbs & Bruns, sternly telling the attorneys for some of the RMBS holders that there is no basis for default under the trust agreements. Gibbs & Bruns is working...

Real estate investment trusts focused on the residential mortgage market had a stellar year in 2014, returning 19.4 percent to investors, a nice comeback from the year before when performance was measured at negative 12.7 percent. According to figures compiled by the National Association of Real Estate Investment Trusts, commercial financing REITs fared a bit worse, returning 14.5 percent compared to a mouth-watering yield of 41.8 percent in 2013. But now both sectors face...

Production of loans with a VA guaranty was moderately strong in the third quarter of 2014, thanks to lower rates and increased demand for the no-downpayment loans, according to Inside FHA Lending’s analysis of the latest agency data. A 14.1 percent quarter-to-quarter surge helped the industry end last year’s first nine months with a total of $76.3 billion in VA loans, mostly purchase home mortgages taken out by a younger generation of war veterans. VA streamline refinancing also accounted for a substantial chunk of originations, 19.2 percent. Volume jumped from $19.5 billion in the first quarter of 2014 to $26.5 billion the following quarter. Lenders closed out the third quarter with $30.2 billion. Stanley Middleman, chief executive officer of Freedom Mortgage, said VA lending is on the upswing, driven by low interest rates. He thinks the VA home loan guaranty program has been ... [ 1 chart ]

Investment banking firms that arrange subordinated debt offerings for mortgage originators are expecting a strong year in 2015, thanks in part to the dismal outlook for initial public offerings. “Sub debt is a good way to grow your business without it being dilutive to your company,” said Bill Dallas, CEO and founder of Skyline Lending, a lender that recently completed a $20 million deal with Ellington Financial, a publicly traded mortgage real estate investment trust. “It allows...

MBS investors this week continued to bid up the price of agency product in the wake of rock-bottom oil prices and economic fears about Asia, Europe and any oil-producing nation that relies too heavily on the energy sector. According to figures compiled by MBS Quoteline, at one point this week investors were paying 105.10 for Fannie Mae MBS with a coupon of 3.5 percent. Back in October the bid on the Fannie 3.5 was a mere 101.83. “Who would pay 105...

The Basel Committee on Banking Supervision recently proposed replacing credit ratings with loan-characteristic metrics for determining capital requirements on bank holdings of residential MBS and commercial MBS. Federal regulators in the U.S. note that the proposal is preliminary and any changes to U.S. capital requirements will go through a notice and comment process separate from the BCBS’ activity. The current standardized approach established by Basel for determining capital requirement riskweights prescribes the use of external credit ratings for residential MBS and commercial MBS, among other holdings by banks subject to capital requirements. “While acknowledging that credit rating agencies play an important role in financial markets and that external credit assessments provide valuable information that may assist in the analysis of credit risk exposures, the hard-wiring of external credit assessments into standards, laws and regulations may often lead...