Reforms seen in the new era of non-agency jumbo MBS issuance aren’t enough to prompt significant investor participation, according to John Gidman, president of the Association of Institutional Investors. At a hearing this week by the Senate Committee on Banking, Housing and Urban Affairs, Gidman and others called for a number of changes to the non-agency market. “The fundamental structural and process weaknesses for non-agency residential MBS securitization have not been fixed in the current private-label securities market,” Gidman said. “The issuance process itself is very opaque. Ratings continue to be shopped, issuers are still incentivized to water down representations and warranties, and continued variability in structures and documentation make the market more challenging for investors and raise the costs of funding.” He acknowledged...

With some federal agencies effectively downsized by the government shutdown, Ginnie Mae continues to guarantee MBS, but it’s unclear how long it can go on with limited staff and commitment authority. Under the shutdown contingency plan drafted by the Department of Housing and Urban Development, Ginnie has limited its operations to key functions fulfill its obligations to issuers and investors. The agency said MBS guaranties would be honored during the shutdown. While the rest of the workforce is on furlough, some 44 essential salaried employees will continue...

Non-agency MBS investors are still unhappy with how negotiations for the $25 billion national servicing settlement were handled and are concerned that the federal government will pull a similar move in settlement negotiations with JPMorgan Chase. John Gidman, president of the Association of Institutional Investors, said non-agency MBS investors weren’t involved in negotiations for the national servicing settlement and haven’t been involved in ongoing discussions regarding Chase. He said using funds from non-agency MBS to remedy allegations of inappropriate, unlawful or illegal behavior on behalf of an issuer or servicer makes it harder for investors to price risk. “This consequently makes...

Wells Fargo claimed partial victory after a Manhattan federal district court judge dismissed certain claims against it in a government lawsuit alleging the bank lied about the quality of defaulted mortgages insured by the FHA. District Court Judge Jesse Furman ruled that legal injury claims based on events that happened prior to June 2009 were time-barred and that the government had waited too long to file a lawsuit. He also threw out claims of negligence and unjust enrichment. On the other hand, Furman let stand claims under the Financial Institutions Reform, Recovery and Enforcement Act of 1989, which the ...

HUD Delays Implementation of Short-Sale Participation Requirement. The implementation of the PFS Participation Requirement, which is found in Mortgagee Letter 2013-23, Updated Pre-Foreclosure Sale and Deed-in-Lieu-of-Foreclosure Requirements, has been delayed indefinitely. All other provisions included in the mortgagee letter remain in effect. Previous guidance on short-sale participation requirements also remain in effect until further notice. FHA to Consolidate Lender ID Numbers. The FHA will consolidate the lender identification numbers of those participating in both the FHA Title I and Title II programs, provided ...

Investors are eager to get their hands on upcoming risk-sharing deals from Fannie Mae and Freddie Mac even though Freddie’s recent deal was unrated. According to interviews with investors in Freddie’s $500 million Structured Agency Credit Risk bond, 50 different companies bought into the deal with “at least 20 different investors in each tranche,” according to confidential research on the transaction supplied to Inside MBS & ABS. “Word has gotten around...

The Federal Home Loan Bank of Chicago has announced a partnership with Ginnie Mae to issue securities guaranteed by the secondary market agency and backed by home loans originated by member financial institutions. The new conduit product, “MPF Government Mortgage-Backed Securities,” provides another secondary mortgage market outlet for lenders originating mortgages insured by the FHA or guaranteed by the VA or the Rural Housing Service. Low-volume lenders that currently lack direct access to the secondary market are expected to benefit from the new FHLBank program. MPF GMBS would allow lenders to ... [1 chart]

Real estate investment trusts that focus on investing in residential MBS continued to see declines in their portfolios during the second quarter, but their earnings outlook may have improved somewhat this week, analysts say. Residential mortgage REITs held a combined $327.3 billion of single-family MBS as of the end of the second quarter, according to a new market analysis by Inside MBS & ABS. That was down 5.4 percent from the previous quarter, and it was the third straight quarterly decline since REIT MBS holdings reached a high of $374.2 billion in September 2012. REIT MBS holdings are...[Includes one data chart]

Now that PennyMac Mortgage Investment Trust has put together its first jumbo MBS, can a security collateralized by non-performing loans be far behind? “We’ve looked at it,” said a company spokesman. “We’d like to do one down the road, but we’re not there yet. For us, it will happen when the execution of NPLs is more economical.” One thing is...

Commercial banks and savings institutions held a total of $1.528 trillion in residential MBS in portfolio as of the end of the second quarter, down 2.1 percent from the end of March, according to a new analysis and ranking by Inside MBS & ABS. Combined bank/thrift investment in MBS has been under steady pressure since the Federal Reserve resumed buying massive amounts of new agency MBS. The second-quarter decline brought the industry’s total MBS portfolio to its lowest point in two years. The one area where banks and thrifts have beefed up...[Includes two data charts]