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 ...

Ginnie Mae has announced new data disclosures effective Sept. 1, but investors say it is information they do not need. These include indicators identifying first-time homebuyers, type of third-party originator, and the upfront and annual mortgage insurance premiums. The new disclosures will provide greater transparency on the collateral that backs Ginnie Mae mortgage-backed securities, the agency explained in its latest guidance to program participants. The move also aligns Ginnie Mae’s data disclosures with the industry, it added. Issuers that are unable initially to provide the data will ...

Western Asset Management, a real estate investment trust, has announced a $160 million initial public offering to finance purchases of agency MBS. The Pasadena, CA-based company, a fixed-income subsidiary of Legg Mason, plans to raise cash by offering 8.0 million shares to investors at a price of $20. It also plans to offer 2.2 million units, consisting of a share and a warrant to half a share, and 46,043 shares in concurrent private placements. According to Renaissance Capital, the REIT will command a market value of $207 million after the offering. JPMorgan Chase, Deutsche Bank...

Bank of America’s pending $8.5 billion settlement with non-agency MBS investors appeared to gather some momentum last week following a BofA-favorable ruling by a New York state court. New York State Supreme Court Justice Barbara Kapnick ruled the case will move forward under Article 77 rather than a broader plenary action sought by investors opposed to the amount of the settlement. The proposed settlement reached last June with 22 institutional investors would resolve BofA’s liability related to non-agency MBS issued by Countrywide. Supporters of the settlement, including the trustee, Bank of New York Mellon...

Option One Mortgage Corp. this week agreed to pay $28.2 million to settle charges brought by the Securities and Exchange Commission over the former subprime lender’s MBS disclosures regarding its ability to cover repurchase demands. Much of the litigation over failed non-agency MBS has focused on alleged misrepresentation about the quality of the loans delivered to securitization trusts, the servicing of those loan pools and the performance of trustees. The Option One settlement stems from the SEC’s contention that the company, one of the leading subprime lenders and securitizers during the heyday of...