Sales and purchases of vintage non-agency MBS have been well above average levels in recent weeks as investors see value in the sector with the housing market recovering. The purchases are being made by traditional buyers such as money managers and insurance companies as well as by banks, according to industry analysts. Daily trading volume of non-agency MBS has averaged about $3.0 billion in recent weeks, based on an analysis of TRACE data by Barclays Capital. During the past six to 12 months, daily non-agency MBS trading averaged $1.7 billion to $2.0 billion. Some $1.09 trillion in non-agency MBS was...

Major investors in non-agency mortgage-backed securities said they are years away from being confident enough in the market to support a revival of non-agency MBS issuance. Damon Silvers, associate general counsel for the AFL-CIO, said significant reforms must be put into place before pension funds will feel comfortable buying non-agency MBS again. “I’m not optimistic that the kinds of moves that need to be made in terms of the banking system or the mortgage-backed securities markets are likely to be made anytime soon,” he said ...

Another fund participating in the Public-Private Investment Program terminated its investment period, suggesting the PPIP is less useful for investors in non-agency mortgage-backed securities than investing without the help of the Troubled Asset Relief Program. The Treasury Department recently announced that the RLJ Western Public-Private Investment Fund ended its investment period on July 15. Invesco’s PPIF made a similar announcement in September and ended its participation in the PPIP in April, leaving ... [Includes one chart]

The withdrawal of one of the biggest opponents to Bank of America’s pending $8.5 billion settlement with non-agency mortgage-backed security investors will not necessarily speed approval of the deal, according to industry analysts. Last month, the hedge fund Baupost (known as Walnut Place in the lawsuit) dropped its objections to the settlement and moved to sell some its holdings on Countrywide Financial non-agency MBS. A number of other entities continue to oppose the settlement, including AIG and ...

Chicago is the latest municipality to consider using eminent domain to seize mortgages from non-agency mortgage-backed securities in an effort to help borrowers with negative equity. Meanwhile, the conservator of two of the largest holders of non-agency MBS joined other investors in raising concerns about the plan and industry analysts suggest the plan has serious defects. Chicago will hold hearings to consider the eminent domain plan proposed by Mortgage Resolution Partners. In June, San Bernardino ...

The Federal Housing Finance Agency may pursue its residential mortgage-backed securities legal action against affiliates of Residential Capital LLC, Ally Financial’s defunct mortgage unit, a federal judge has ruled. Last week, Judge Denise Cote of the U.S. District Court for the Southern District of New York denied ResCap’s request seeking an automatic bankruptcy stay of its numerous MBS lawsuits, including one filed by the FHFA last year. The FHFA, as GSE conservator, sued UBS Americas in July 2011 alleging that billions of dollars of MBS purchased by Fannie and Freddie were based on offering documents that contained “materially false statements and omissions.”

Narrower spreads on new investments and rising prepayments could dampen earnings in the second quarter of 2012 for most residential mortgage real estate investment conduits (REITs) that invest in mortgage-backed securities, according to a new report from Keefe, Bruyette & Woods research. During the quarter, the Fannie Mae 30-year current coupon fell nearly 50 basis points from the prior quarter as a result of a 57 bps drop in the yield on a 10-year Treasury note. Dividends, a generally good indicator of profitability, either have been flat or down modestly, the KBW report noted. On a brighter note, while the government-sponsored enterprises’ monthly data showed...

Alleged manipulation of the London Interbank Offered Rate could have had a significant impact on investments in MBS and ABS, according to industry analysts. However, three weeks after Barclays Bank reached a settlement with regulators on LIBOR manipulation, major securities investors have yet to voice concerns about potential losses tied to the interest rate benchmark. Tom Deutsch, executive director of the American Securitization Forum, said he has not heard any “hubbub” from investors thus far about the impact of potential LIBOR manipulation. The Securities Industry and Financial Markets Association, the Association of Mortgage Investors and the Association of Institutional Investors did not reply to requests for comment on the issue. Laurie Goodman, a senior managing director at Amherst Securities Group, said it is unknown...

Bank of America shareholders may proceed with their securities fraud lawsuit which claims that BofA concealed its potential problems with the Mortgage Electronic Registration System, exposing investors to risky mortgage securities, a federal judge ruled last week. However, U.S. District Judge William Pauley of the Southern District of New York determined that the shareholders, led by the Pennsylvania Public School Employees’ Retirement System, can move forward only against the company itself and not against BofA executives. The investors filed suit in September 2011 alleging they had been misled into...

The vast majority of repurchase requests on mortgages in non-agency mortgage-backed securities were in dispute in the first quarter of 2012, according to an Inside Nonconforming Markets analysis of Securities and Exchange Commission 15Ga disclosures. However, industry analysts expect settlements to increase during the second half of this year. Securitizers reported $29.03 billion in mortgages in non-agency MBS with repurchase demands in the first quarter of 2012, with 98.6 percent of the volume classified as in dispute ... [Includes one chart]