Uncertainty lingers in the wake of last week’s announced $8.7 billion settlement between non-agency MBS investors and Ally Financial’s subsidiary Residential Capital as the details and implications of the deal resonate throughout the market. The agreement with 17 residential MBS investors was struck in a photo finish shortly before ResCap’s bankruptcy filing, and it represents the second major settlement between non-agency MBS investors and the sponsors of non-agency securitizations. Bank of America’s controversial $8.5 billion proposed settlement with investors that purchased Countrywide non-agency MBS...

While non-agency mortgage-backed security investors did not file a formal challenge to the $25.0 billion servicing settlement, they remain concerned with the implementation of principal forgiveness loan modifications. The latest qualms were raised last week in a letter to Shaun Donovan, secretary of the Department of Housing and Urban Development, from Sens. Sherrod Brown, D-OH, and Bob Corker, R-TN. “Because any settlement could dramatically affect [pension funds and retirement funds], their managers should ...

The still-developing market for real estate-owned property rentals is starting to get crowded. A number of firms have formed in recent weeks hoping to benefit from low prices on REO properties. Homebuilder Beazer Homes announced this month that it formed a private real estate investment trust to acquire, refurbish and lease single-family homes on a large scale in select markets. Beazer Pre-Owned Rental Homes was arranged by affiliates of Kohlberg Kravis Roberts & Co. and has approximately $85 million in funding ...

Banks and thrifts added some $67.2 billion in residential MBS to their investment portfolios during the first quarter of 2012, according to a new Inside MBS & ABS ranking and analysis. The increase amounted to a 4.3 percent gain from bank and thrift MBS holdings at the end of 2011, and raised the industry’s total investment to a record $1.634 trillion. It marked the first time since 2004 that banks and thrifts owned more than a quarter of the MBS market. The biggest increase was in holdings of agency pass-through securities, which rose 6.2 percent from the fourth quarter to $974.4...(Includes two data charts)

Ally Financial negotiated an $8.7 billion settlement with investors in non-agency MBS issued by Residential Capital before putting the company, one of the pioneers in the securitization of jumbo, Alt A and subprime mortgages, into bankruptcy. Long before ResCap’s bankruptcy filing early this week, trustees for outstanding non-agency MBS had already been instructed by 17 investors to sue Ally Financial for compensation over alleged violations of ResCap representations and warranties. The deal was reached shortly before the filings, according to a source close to the matter. Ally said that some 290 MBS trusts...

The government overseer of Fannie Mae and Freddie Mac wants to help trim the footprint of the two government-sponsored enterprises by selling credit risk to private investors, but a top public policy analyst questions how effective such efforts will be in bringing private capital back to residential mortgage markets. “The basic business model of credit-risk insurance doesn’t just make sense,” said Karen Shaw Petrou, managing partner at Federal Financial Analytics, a think-tank in Washington, DC. “Because of the damage done in the run-up to the crisis, traditional insurers are at great risk of being...

Converting real estate owned properties to rental units is still in its infancy but it could be a compelling asset type for investors. If securitized, it could provide a much-needed boost to the real estate market, according to Standard & Poor’s. In a recent analysis, S&P suggested taking the government’s REO-to-rent pilot program a step further and consider securitizing the rental streams from a pool of underlying REO assets, which could potentially provide a steady cash flow to back securitization transactions. Proceeds from the eventual sale of the properties could also be incorporated into the cash...

The retained mortgage investment portfolios of Fannie Mae and Freddie Mac have been reliable generators of net income over the past few years, but the government-sponsored enterprises continue to shrink the profit centers under the terms of their federal bailout. Fannie and Freddie held a combined $1.310 trillion in mortgage-related investments at the end of the first quarter of 2012, down 3.8 percent from the previous quarter. The GSEs’ combined portfolios were down 9.6 percent from the same period in 2011; their agreements with the Treasury Department call for annual...(Includes one data chart)

“The private market will never come back if the best deal for the private investor is the government,” Lewis Ranieri, chairman and founding partner of Ranieri Partners, said this week at the Mortgage Bankers Association’s National Secondary Market Conference in New York City. Talk at the conference focused on almost anything other than activity in the non-agency market. David Stevens, president and CEO of the MBA, said dealing with repurchase issues ...

After a tough economic environment had officials at Redwood Trust considering whole loan sales in lieu of non-agency securitization, the real estate investment trust revealed last week that it profited from the two securities it issued during the first quarter of 2012. However, the REIT is still set to complete some whole-loan sales and even intends to add conforming-balance loans to its product menu ...