A number of mortgage finance industry groups have expressed concern about how the CFPB’s ability-to-repay rule is interfering with the return of private investor capital back into the sector – mostly because of the rule’s assignee liability provisions. The industry comments came in response to a request from the Treasury Department in June for suggestions to encourage private capital to return to the non-agency mortgage-backed securities space. The Association of Institutional Investors said the ATR rule’s assignee liability provision “unfairly punishes investors who have nothing to do with the origination of loans and oftentimes have limited insight into the origination practices.” The assignee liability provision therefore introduces a risk that is almost impossible to price for those not directly involved in ...

The Structured Finance Industry Group this week proposed the first in a planned long line of standards aimed at increasing transparency for non-agency MBS investors and boosting new issuance. The first edition in the SFIG’s series of “green papers” covers certain representations and warranties, triggers for repurchase, due diligence and communication with investors. Richard Johns, SFIG’s executive director, said about 200 individuals from about 50 organizations involved in the non-agency MBS market have participated in Project RMBS 3.0. “The goal here is...

Officials at Ocwen Financial announced late last week that the company plans to use its clean-up call option on loans backing vintage non-agency MBS that it services. Officials see strong profits in paying off non-agency MBS investors at par and then liquidating real estate owned properties whose loans were included in non-agency MBS. “The opportunity results from the arbitrage of the underlying loans in REO being worth more than the securities,” William Erbey, Ocwen’s executive chairman, said during the servicer’s earnings call for the second quarter of 2014. “In other words, the whole is worth less than the sum of the parts.” He said...

Mortgage trustees are still awaiting state court approval of a $4.5 billion settlement with JPMorgan Chase in relation to faulty residential MBS issued by the bank and the now-defunct Bear Stearns between 2005 and 2008. If approved by the New York State Supreme Court, the agreement would resolve representation and warranty claims as well as servicing claims related to loans in 330 mortgage securitization trusts, as well as claims over document delivery. In addition, the bank agreed to change its servicing procedures with respect to mortgage loans in the trusts. The proposed settlement does not resolve...

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...