Intercontinental Exchange (ICE), a global network of exchanges and clearing houses and a top energy trader, is reportedly seeking to gain a foothold in the mortgage market via the Mortgage Electronic Registration System (MERS). ICE is negotiating a partnership agreement with MERSCorp Holdings, parent company of MERS, as part of its plan to add mortgages to its primary derivatives business, Bloomberg reported recently. Both ICE and MERS declined to comment on the story. According to the report, the Atlanta-based ICE has been studying...

The immediate future is looking mostly bright for publicly-traded real estate investment trusts that toil in the commercial real estate sector – that is, as long as origination volumes remain healthy. Several high-profile commercial REITs – including Starwood Property Trust, Colony Financial and Ladder Capital – do not report second quarter results until next week, but hopes are high that earnings will be mostly positive. One commercial REIT that did report this week was...

A trade group representing non-agency MBS investors continues to raise concerns about settlements that give servicers credit for completing loan modifications on mortgages in non-agency MBS. Regulators and others counter that the settlements include protections for the investors, who ultimately benefit from loan mods completed under the settlements. The latest flare-up involves $4.0 billion in loss mitigation actions required of JPMorgan Chase under a recent settlement with federal and state regulators. Last week, the settlement’s monitor credited Chase with $6.31 million in consumer relief under the settlement, with 56 percent of the relief completed on Chase’s own holdings and the remainder completed on loans serviced for others, likely mortgages in non-agency MBS. The settlement prompted...

Efforts to reform the non-agency market may be gathering momentum as the Structured Finance Industry Group is set to reveal its preliminary recommendations for changes to non-agency mortgage-backed securities and comments on the sector’s reform are due to the Treasury Department shortly. Industry participants have plenty of suggestions for how to fix the market, but any revival looks to be years away. On Aug. 4, the SFIG will release “green papers” as part of its Project RMBS 3.0 initiative ...

In the past two weeks, BlackRock has completed auctions of vintage non-agency MBS with a total unpaid principal balance of $8.1 billion. While the sales had the potential to push too much supply into the market, investor demand for the securities appears to have been strong. The market absorbed the first auction, for $3.7 billion in mostly subprime MBS from 2006, “without a hiccup,” according to analysts at Barclays Capital. Credit Suisse submitted winning bids on all of the non-agency MBS auctioned by BlackRock in the past two weeks, with most of the securities quickly being placed with other investors, indicating strong demand. Of the $3.7 billion in non-agency MBS auctioned last week, 96 percent of the balance was placed...

Re-securitization activity is above levels seen last year because of compressed yields on vintage non-agency MBS, according to industry analysts. Re-securitizations – all of which are privately placed and typically without a rating – can offer investors more credit risk and leverage than vintage non-agency MBS. In the first half of 2014, 20 re-securitizations of real estate mortgage investment conduits totaling $5.90 billion were issued, according to Bank of America Merrill Lynch. Activity is picking up: June alone accounted for 28.3 percent of the issuance. “In an environment where yields have compressed in the vintage non-agency space, subordinate re-REMIC classes can offer...

As the Securities and Exchange Commission continues to consider how to reform the rating process for structured finance transactions, including non-agency MBS, industry analysts affiliated with the Brookings Institution suggested that the fix doesn’t require altering the issuer-pay model that has been in place for more than 40 years. Instead, the SEC should help establish transparent, numerical benchmarks, according to two industry participants, shifting away from the current system of letter-based ratings that are also used for corporate debt and sovereign debt. Ann Rutledge, a founding principal at R&R Consulting, a credit rating service, and Robert Litan, a nonresident senior fellow at The Brookings Institution, detailed their proposal in an economic study recently published by Brookings. “Securities that are rated only in an ordinal fashion – in order of likelihood of default – can be...

The characteristics of mortgages included in jumbo mortgage-backed securities remained strong in the second quarter of 2014, according to a new analysis by Inside Nonconforming Markets. However, the high quality of jumbo MBS has not attracted enough investors to make issuance more appealing for banks than retaining the loans in portfolio. Debt-to-income ratios on loans included in the $1.03 billion in jumbo MBS issued in the second quarter averaged ... [Includes one data chart]

Ginnie Mae servicing remained flat in the second quarter of 2014, continuing a trend that began in the third quarter of last year as FHA refinancing fell and purchase activity slowed, according to Inside FHA Lending’s analysis of Ginnie Mae data. Servicing volume rose by only 0.7 percent from the first quarter, slightly lower from the 0.9 percent increase reported by Ginnie Mae servicers for the first three months of 2014. On the other hand, volume was up modestly by 5.9 percent year-over-year, data showed. Ginnie Mae servicers ended the second quarter with a total of $1.46 trillion in unpaid principal balance, up from $1.45 trillion in the prior quarter. Four out of the top five Ginnie Mae servicers were banks. Wells Fargo closed out the second quarter with $425.9 billion in servicing volume, a 0.2 percent decrease from the previous quarter but up 2.1 percent from a year ago. Its 29.2 percent market share put it ... [1 chart]

Ginnie Mae would play a greater role in a private-market partnership model envisioned in proposed housing finance reform legislation introduced recently by House Democrats. However, many in the industry doubt whether a Democrat-sponsored reform bill will pass in this Congress. Sponsored by Reps. John Delaney (MD), John Carney (DE) and Jim Himes (CT), the Partnership to Strengthen Homeownership Act would put Ginnie Mae in charge of all single- and multifamily mortgage-backed securities with government backing. Among other things, H.R. 5055 would create a new Ginnie Mae MBS for conventional mortgages backed by the full faith and credit of the federal government with minimum support from the private sector. Under the proposed model, private entities would assume up to 5 percent of the first-loss capital on the MBS. The remaining 95 percent would be shared between ...