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 ...

Ginnie Mae is increasing its scrutiny of issuers and tightening the screening of new issuer applicants to ensure that all participants in its mortgage-backed securities program fulfill their obligations. The agency is concerned about issuers coming in with little understanding of how the program works and what their responsibilities are, and putting Ginnie Mae at risk, said Michael Drayne, senior vice president at Ginnie Mae’s Office of Issuer and Portfolio Management, during a recent webinar hosted by Inside Mortgage Finance. Drayne noted Ginnie Mae’s success, saying that the only way it would not be profitable is ...

Mortgage-backed securities production by the top Ginnie Mae issuers in the third quarter of 2012 slipped but not by enough to offset the 32.1 percent gain on a year-over-year basis, according to an Inside FHA Lending analysis of Ginnie Mae data. Ginnie Mae MBS issuance fell by a mere 0.1 percent from the second quarter, a hiccup that would have been easily cured had any of the top five issuers posted even a modest gain. All five issuers saw their issuances fall during the quarter. The top issuers reported a total of $100.57 billion in MBS sold to investors at the end of the third quarter, down from $100.62 billion the previous quarter. The slip disrupted an ...

Investors in non-agency MBS raised concerns about principal forgiveness required by the $25 billion national servicing settlement agreed to earlier this year by five banks. While most of the banks claimed they would focus the efforts on their own portfolio holdings, MBS investor concerns appeared to have been realized as Bank of America said about half of the principal it has forgiven was tied to mortgages in non-agency MBS. However, Shaun Donovan, secretary of the Department of Housing and Urban Development, noted this week that investors in Bank of America’s non-agency MBS agreed to allow principal reductions on their holdings. “We knew from the beginning, that because Bank of America had...

Fannie Mae and Freddie Mac continued to trim their retained holdings of MBS and unsecuritized mortgages during the third quarter, but at a slower pace than in previous periods, according to an analysis by Inside MBS & ABS of earnings reports released this week by the two government-sponsored enterprises. One of the conditions of the conservatorships the GSEs entered four years ago was that they would reduce their retained mortgage portfolios by 10 percent a year. Those terms were revised in August to include a 15 percent annual wind-down, which would take each GSE’s investment portfolio down to $250 billion by the beginning of 2018, four years sooner than under the previous arrangement. As Freddie noted...[Includes one data chart]

The Securities and Exchange Commission has been quietly meeting with investors in non-agency mortgage-backed securities looking for leads to bring regulatory actions. Reaction from investors to the SEC’s outreach has been decidedly mixed, though Reid Muoio, a deputy for the SEC’s structured and new products unit, said the SEC is working to improve regulation on behalf of investors. Speaking at the recent ABS East conference sponsored by Information Management Network in Miami, Muoio detailed an SEC outreach program that was apparently previously undisclosed. He said that a ...

Investors interested in buying new non-agency mortgage-backed securities suggest that the wide variety seen in the pooling and servicing agreements and reporting of vintage non-agency MBS is insufficient. Many investors at the recent ABS East conference in Miami sponsored by Information Management Network called for standardization. “Investors clearly welcome standardization,” said Dapeng Hu, a managing director at BlackRock, which manages more than $150.0 billion in MBS investments ...

Basel III capital requirements proposed by federal regulators will have a significant negative impact on U.S. bank holdings of agency and non-agency MBS, according to industry participants. The capital requirements have yet to be finalized and are currently scheduled to begin being phased in Jan. 1 with full implementation in 2018. In June, the Federal Deposit Insurance Corp., the Federal Reserve and the Office of the Comptroller of the Currency proposed rules to implement Basel III capital standards – the most comprehensive overhaul of the U.S. bank capital framework since Basel I was implemented in 1989. Comments were due last week, and strong warnings were submitted by trade groups representing MBS market participants, banks and mortgage lenders. “If the Basel III [proposed rule] were implemented...

Participants in the non-agency mortgage-backed security market expect the amount of MBS backed by newly originated non-agency mortgages to increase significantly in 2013 and beyond – even without reform of the government-sponsored enterprises. A number of factors have combined to make the market ripe for new non-agency MBS, according to attendees at the ABS East conference sponsored by Information Management Network this week in Miami. “Borrowers want loans, lenders want to lend and investors want yield,” ... [Includes one data chart]