A New York federal judge has given preliminary approval to a $280 million settlement proposed by JPMorgan Chase to investors who claimed they were misled into buying $36.8 billion of non-agency MBS, ending a long-running, consolidated class-action suit. U.S. District Judge Pamela K. Chen granted initial approval late last week to the settlement with investors led by the Public Employees’ Retirement System of Mississippi. The Mississippi pension plan sued...

Issuers of jumbo mortgage-backed securities could increase their activity in the second quarter of 2014 after two consecutive quarters of suppressed issuance. Pricing for new jumbo MBS has improved, according to industry participants, though many expect issuance to remain constrained. In April, Redwood Trust issued a $346.30 million jumbo MBS that priced at the end of the first quarter. At the end of April, Credit Suisse issued a $271.73 million jumbo MBS, according to rating reports ...

Issuers of non-agency mortgage-backed securities warn that the latest disclosure proposal from the Securities and Exchange Commission could completely shut down issuance of non-agency MBS. Since 2010, the SEC has been working on disclosure requirements for MBS and other structured finance products. The regulator was set to approve a final rule in February that would revise asset-level disclosure requirements under Regulation AB but instead re-proposed a portion ...

The House Appropriations Committee this week approved the FY 2015 Transportation, Housing and Urban Development funding bill, which, among other, things contains a provision prohibiting federal housing agencies from facilitating the use of eminent domain in resolving foreclosure problems. Specifically, the FHA, Ginnie Mae and the Department of Housing and Urban Development would not be allowed to use funds appropriated by Congress to “insure, securitize or establish a federal guarantee” of any mortgage or mortgage-backed security that refinances or replaces a mortgage that has been subject to eminent domain condemnation or seizure by a state, municipality or any other political subdivision of a state. In addition, the bill would prohibit the use of appropriated funds or any receipts or amounts collected under any FHA program to implement the FHA’s new Homeowners Armed with Knowledge (HAWK) program. HUD has proposed to ...

UBS AG and Union Central Life Insurance Co. this week announced they have settled their legal dispute regarding the sale of residential MBS that UBS sold to the insurer in the years leading up to the financial crisis. The settlement reached in early March but jointly announced just this week, ends the legal action begun in a New York federal court in 2011. Union Central and affiliates Ameritas Life Insurance Corp. and Acacia Life Insurance Co. sued UBS and other financial service companies and executives in 2011, alleging that the defendants misrepresented the quality of the loans underlying the residential MBS that they sold to the insurers. In a 2012 amended complaint, Union Central alleged...

Industry participants are divided on whether legislation under consideration in Congress to reform the government-sponsored enterprises will help encourage an increase in private capital in the mortgage market. In a speech this week, Shaun Donovan, the secretary of the Department of Housing and Urban Development, was adamant that the GSE reform bill from Sens. Tim Johnson, D-SD, and Mike Crapo, R-ID, will encourage non-agency investors to return to the mortgage market ...

Standard & Poor’s earned a split decision this week in its counter-offensive against the federal government’s civil fraud lawsuit filed last year, which the rating agency claims is payback for its August 2011 downgrade of the U.S.’ ‘AAA’ credit rating. The Justice Department in February 2013 filed a $5.0 billion lawsuit against S&P accusing it of knowingly inflating its ratings of residential MBS and collateralized debt obligations to boost its revenue and market share in the years leading up to the 2008 financial crisis. On Tuesday, a federal judge in the U.S. District Court in Santa Ana, CA, denied...

Credit officers over the past three months reported an increased demand for non-agency MBS, suggesting that private capital could be flowing more freely through the U.S. housing market, according to a Federal Reserve survey released last week. The Fed’s Senior Credit Officer Opinion Survey on Dealer Financing Terms for March 2014 found little change in the credit terms among the 22 participating institutions, with the exception of securities financing, where nearly one-half of dealers reported a hike in demand for funding non-agency residential MBS. “Dealers assessed...

Variations on the treatment of extraordinary expenses in jumbo mortgage-backed securities have prompted the rating services to alert investors. A warning on this issue last week by Fitch Ratings follows similar concerns raised by other rating services. Extraordinary expenses in non-agency MBS can be caused by legal claims against the trust, costs associated with a third-party reviews to identify representation-and-warranty breaches, and costs related arbitration, among other issues ...

The equipment-backed ABS sector will likely have another good year this year, and investor interest remains strong, according to a senior analyst at the DBRS credit rating service. “For the equipment finance industry in 2014, we are moderately optimistic,” Chuck Weilamann, senior vice president at DBRS, said during a teleconference last week. “We’ve certainly seen delinquencies and charge-offs hit lows, with a five-year low achieved in 2013.” Not surprisingly, DBRS made...