Residential Capital, a former subsidiary of Ally and currently in Chapter 11 bankruptcy, has asked the court for permission to sell an estimated $130 million in FHA-insured mortgage loans. ResCap made the request in a recent filing with the U.S. Bankruptcy Court in Manhattan, which monitors and approves all of the beleaguered company’s activities and requests during bankruptcy. According to the company, its unsecured creditors have signed off on the prospective sale of the FHA loans although the court would still have to approve the request during a scheduled hearing on Jan. 16. ResCap sought bankruptcy protection on ...

Now that Bank of America has inked a long-rumored deal to sell mortgage servicing rights on some $308 billion of distressed mortgages to Nationstar and Walter Investment Management, the question becomes how much more the bank may unload. The answer may be quite a lot. Paul Miller, an analyst with FBR Capital Markets, said that he anticipates the megabank will sell between $300 billion and $400 billion of MSRs by the time 2013 ends. According to Miller, the “to be sold” product includes $100 billion of Ginnie Mae servicing, $150 billion of Fannie Mae MSRs and $100 billion to $200 billion of Freddie Mac servicing. A BofA spokesman declined...[Includes one data chart]

Staff at the Securities and Exchange Commission this week recommended that the agency do more research before making a decision on how to implement a controversial provision in the Dodd-Frank Act involving random assignments of credit ratings in structured finance. Sen. Al Franken, D-MN, was the major proponent of a requirement that the SEC study the feasibility of creating a government body that would pick which credit rating agency would evaluate new non-agency MBS, non-mortgage ABS, commercial MBS and other structured finance transactions. The provision, Sec. 15e(w) of the Dodd-Frank Act, essentially requires the SEC to implement the new system unless the agency determines that an alternative system would better serve the public interest and protect investors. Although some investors and rating services support the Sec. 15e(w) concept, most securitization market participants oppose...

The agency residential MBS market expanded for the third consecutive quarter during the three months ending in September, according to a new Inside MBS & ABS analysis. A total of $5.39 trillion of single-family MBS issued by Fannie Mae, Freddie Mac and Ginnie Mae were outstanding as of the end of the third quarter of 2012. That was up by a scant 0.2 percent from the previous period, although it was still 0.4 percent below the level at the same time in 2011. Both Ginnie (2.1 percent) and Fannie (0.6 percent) posted...[Includes two data charts]

Investors in non-agency MBS have numerous concerns about a loan modification program proposed by the Obama administration, according to Tom Deutsch, executive director of the American Securitization Forum. The so-called Market Rate Modification program would target borrowers with negative equity on a mortgage in a non-agency MBS. “For the many significantly underwater borrowers that would not default on their mortgage loans, the MRM proposal would ultimately represent a transfer of wealth from the pension fund and 401(k) investors who lent the mortgage principal through residential MBS to borrowers that have not demonstrated any material life changes that would impair their ability to make their monthly mortgage payments,” Deutsch said in a letter this week to the Treasury Department. He noted...

Fannie Mae and Freddie Mac, under directions from the Federal Housing Finance Agency, are close to issuing risk-sharing transactions, according to market participants. The securities will be structured to allow non-agency investors to take subordinate risk on government-sponsored enterprise mortgage-backed securities and will likely help set GSE guaranty fees going forward. Martin Hughes, CEO of Redwood Trust, said his company is currently under a non-disclosure agreement regarding risk-sharing ...

Investors in non-agency mortgage-backed securities are pushing back against a loan modification program proposed by the Obama administration that would target underwater loans backing their investments. “Quite simply, investors have already been significantly harmed by the poor performance of many of the mortgage loans in non-agency MBS, and the Market Rate Modification proposal would only increase the severity of losses suffered by institutional investors,” Tom Deutsch ...

The distressed property share of home sales has decreased in each of the seven months ending in November, according to the latest Campbell/Inside Mortgage Finance HousingPulse Tracking Survey, as short sales, real estate owned activity and investor purchases have become less prevalent. Distressed properties accounted for 33.7 percent of home sales in November, based on the three-month moving average, the lowest level seen in more than three years. Before the decline in distressed property activity, distressed property sales had hovered around 42.0 percent for more than two years. “As housing prices rise and unemployment declines, there are...

The dismissal of a lawsuit from non-agency MBS investors against the rating services was confirmed last week, including a ruling that ratings from Fitch Ratings, Moody’s Investors Service and Standard & Poor’s were not negligent misrepresentations. The U.S. Court of Appeals for the Sixth Circuit confirmed the September 2011 dismissal of a lawsuit brought by investors led by the Ohio Police & Fire Pension Fund. The lawsuit related to 308 AAA-rated non-agency MBS issued between 2005 and 2008, with the investors taking losses of $457 million from the securities. The investors claimed...

A federal court in California recently dismissed claims by the Federal Deposit Insurance Corp. related to non-agency mortgage-backed securities purchased by a bank in 2007 and 2008. According to the ruling, the FDIC should have filed the lawsuit long ago and tolling did not render the claims as timely. FDIC v Countrywide Financial relates to $62.6 million in AAA-rated Countrywide MBS purchased by Strategic Capital Bank in 2007 and 2008. The FDIC was appointed as receiver of the bank on May 22, 2009 ...