Bank of America appeared to clear a hurdle in getting final approval for its proposed $8.5 billion MBS settlement when the New York State Supreme Court last week dismissed an attempt to overturn the deal by an investor group that was not included in the settlement. New York State Supreme Court Justice Barbara Kapnick dismissed the complaint brought by Walnut Place LLC and related entities on March 28 saying that the investors can’t sue BofA directly without giving the Bank of New York Mellon enough time to act in its role as the MBS trustee. Walnut Place’s appeal seeks to revive its suit against BofA. Walnut...

Prudential Financial last week utilized a unique hybrid MBS/covered bond structure to finalize a $1.0 billion bond secured by vintage subprime MBS. Standard & Poor’s, which gave Prudential Covered Trust 2012-1 an A rating, said the original balance of the MBS was approximately $2.8 billion. Proceeds from the sale of the notes are being used to buy a pool of MBS from Prudential Insurance. The issuer will then sell investors the Class A notes and the proceeds will be passed through to Prudential Financial. The underlying certificates are expected to generate sufficient cash flows to make the...

A new investor survey from JPMorgan Chase shows that money managers and other major investor classes have little capacity to purchase significant amounts of MBS, leaving a wide open market for real estate investment trusts to pick up the slack. “From a technical perspective, many investors are already overweight the sector, so there is assumedly limited room for significant further purchases from private investors,” the report said. The status of Fannie Mae and Freddie Mac as leading MBS investors has eroded since they were placed in conservatorship in 2008, and their portfolios are likely to remain...

Fannie Mae and Freddie Mac mortgage-backed securities remained the preferred investment choice of the Federal Home Loan Banks during the fourth quarter of 2011, with a minor decline posted from the previous quarter, according to a new analysis by Inside The GSEs based on data from the Federal Housing Finance Agency. Ginnie Mae securities likewise posted a decline within the 12 FHLBank system during the three-month period ending Dec. 31, 2011. GSE MBS accounted for 69.6 percent of combined FHLBank MBS portfolios, down 2.1 percent from the third quarter of 2011. The Finance Agency’s data do not separately break out Fannie and Freddie volume or share.

A mere 4.7 percent of repurchase demands on loans in non-agency mortgage-backed securities have been resolved, according to a new analysis by Inside Nonconforming Markets. The $352.7 million in completed repurchases account for a small portion of the up to $64.18 billion in recoveries analysts estimate non-agency MBS investors could see from representation and warranty issues. According to new filings with the Securities and Exchange Commission, $7.45 billion in repurchase demands on non-agency MBS had been made as of the end of 2011. The first-time reports were filed by securitizers that are still in business and did not include heavyweights such as Bear Stearns, Countrywide Financial, IndyMac, Lehman Brothers and Washington Mutual ... [Includes one data chart]

An ongoing Securities and Exchange Commission investigation into possible misconduct related to Wells Fargo’s sale of almost $60 billion in MBS has resulted in the agency filing a subpoena enforcement action in the U.S. District Court for the Northern District of California against the firm. “The commission is investigating possible fraud in connection with Wells Fargo’s sale of nearly $60 billion in residential MBS to investors,” the SEC said. “Pursuant to subpoenas dating back to September 2011, the bank was obligated to produce (and agreed to produce) documents to the...

Commercial banks solidified their status as the biggest investor class in the MBS market over the second half of 2011, according to a new analysis by Inside MBS & ABS. Banks increased their holdings of residential MBS by some 5.7 percent over the final six months of last year – a period during which the MBS market itself was shrinking by 2.3 percent. That raised the commercial bank share of the MBS market to 21.1 percent. Savings institutions and credit unions, both significantly smaller groups than commercial banks, also boosted their MBS holdings in 2011. In fact, the...(Includes one data chart)

Concern among non-agency MBS investors over principal reductions that will occur under the multistate foreclosure settlement “is much greater than the reality,” said Iowa Attorney General Tom Miller, who played a pivotal role in those negotiations. During a webinar sponsored by Inside Mortgage Finance this week, Miller said that the $25 billion settlement includes protections for MBS investors. He said that negotiators met with MBS investors during the drawn-out process of reaching a settlement with the five largest servicers. The Association of Mortgage Investors has complained that investors...

Investor appetite for non-agency MBS remained high in the first quarter of 2012 despite the recent uptick in new trading, but this has not done much to push prices above fair value, according to analysts. Through the first quarter of 2012, trading in non-agency MBS has been strong as the average volume in non-agency investment-grade paper more than doubled in January to $1.4 billion, said analysts at Bank of America/Merrill Lynch citing TRACE (Trade Reporting and Compliance Engine) data. TRACE facilitates the mandatory reporting of over-the-counter secondary market transactions in eligible fixed-income...

Deutsche Bank AG has settled a class action suit with disgruntled MBS investors for $32.5 million, after plaintiffs argued that they received “false and misleading” information regarding their investment. The securities were pass-through Alt A MBS issued by Deutsche between May 2006 and May 2007, which were subsequently downgraded and “are no longer marketable at prices anywhere near the price paid by plaintiffs and the class,” said an amended complaint. The class action, filed in 2008 by unions Massachusetts Bricklayers and Masons Trust Funds, the Pipefitters’ Retirement Fund Local 597...