Bank of America won a favorable ruling this week on its proposed $8.5 billion settlement with a group of non-agency mortgage-backed securities investors. With the settlement likely to be decided in state court, analysts suggest that the deal will serve as a model for other non-agency MBS disputes. Baupost Group, a distressed debt fund that has challenged the settlement under the name “Walnut Place,” succeeded in October in having the settlement moved to federal court. However, the Second Circuit Court of Appeals determined this week that the settlement should be overseen by the Manhattan State Supreme Court ...

With the economics of non-agency securitization uncertain, Redwood Trust announced this week that it is considering bulk sales of newly originated non-agency jumbo loans in lieu of securitization. The real estate investment trust said it plans to issue four to six mortgage-backed securities this year – including the one completed in January – depending on whether the REIT sells a portion of its whole loans on a bulk basis. The business decision to either securitize or sell whole loans will be based on balancing ...

Ginnie Mae will publish, in advance, the CUSIP and pool information for multiple issuer pools (MIP) on its website for the current month, plus the upcoming three months of issuance. The information will be published by pool term, pool type and security interest rate. This enhancement applies to all securities with an April 1, 2012, issue date and thereafter. According to Ginnie Mae, publishing the CUSIP and pool numbers will improve issuers’ ability to manage their loan pipelines and MIP loan package submissions before the pool is finalized. Both the finalized CUSIP and pool numbers as well as the future CUSIP and pool numbers for MIPs will be ...

The U.S. Court of Appeals for the Second Circuit is apparently on the verge of deciding in which jurisdiction the pending $8.5 billion Bank of America/Countrywide residential MBS representations and warranties settlement with Bank of New York Mellon and investors will be finalized. The final outcome is expected to influence similar disputes involving other large mortgage originators, but probably on a smaller scale. Last week, the appeals court held a hearing to determine if the case should be moved back to New York state court, which would accelerate a conclusion of the settlement. “A final decision from...

State and local housing finance agencies are looking at ways to rekindle investor interest in single-family housing bonds, including the potential use of Ginnie Mae MBS as collateral for mortgage-related municipal bonds, according to the agency’s top executive. More housing finance agencies are considering returning to FHA and Ginnie Mae to take advantage of the government insurance and guarantee to boost their long-term, fixed-rate bonds at rates low enough for HFAs to continue offering affordable rate mortgage products, according to Ginnie Mae President Ted Tozer. As the municipal bond market...

The massive legal action initiated by the Federal Housing Finance Agency last year on behalf of Fannie Mae and Freddie Mac against many of the nation’s biggest lenders is getting ready to face its first legal challenge, and the federal judge’s ruling will determine the scope and direction of the cases, experts say. The FHFA lawsuits seek tens of billions of dollars in damages for losses incurred by Fannie and Freddie on purchases of approximately $200 billion in residential mortgage-backed securities.

MBS investors were not at the negotiating table for the multistate servicing settlement, yet they will feel the reverberations of the principal reductions and loan modifications the banks have promised state attorneys general and federal agencies. The $25 billion agreement reached last week among 49 states, the federal government and five major servicers – Bank of America, Wells Fargo, JPMorgan Chase, Citigroup and Ally Financial – allocates $10 billion toward principal reductions for underwater borrowers at risk of default. The banks will cough up another $7 billion for other forms of borrower...

Reaction among non-agency participants regarding the settlement by five large bank servicers announced last week has been mixed. Investors are divided on what impact principal forgiveness loan modifications will have on non-agency mortgage-backed securities – largely because the settlement terms have not been settled yet. “Once the bank modifies their own portfolio loans, where it makes sense to reduce principal, there is a huge incentive to do the rest of the modifications using investor money,” warned Amherst Securities Group. “This stems from the fact that the servicers are able to use investor funds to satisfy their own claims. And the conflicts of interest are exacerbated because of the second liens ...

With prices relatively low, vintage non-agency mortgage-backed securities have been a hot item in recent weeks. Some analysts suggest that the buying boom has already peaked and the collateral is overpriced again, though a significant amount of non-agency MBS is still available for sale. “The non-agency market has rebounded in 2012 after a poor second half of 2011,” according to analysts at Bank of America Merrill Lynch. The Federal Reserve’s two sales in as many months of Maiden Lane assets are as good an indicator as any that investor demand for non-agency MBS is strong ...

Non-agency market participants and stock investors appear to be optimistic about the prospects for real estate investment trusts. REITs are positioned to absorb a portion of the agency share of mortgage origination activity, and investor interest in REIT stocks has increased recently. “REITs should definitely take a big part of the agency footprint,” said Michael Commaroto, president and CEO of Apollo Residential Mortgage, a hybrid REIT. Such REITs invest in both agency MBS and non-agency MBS, with agency MBS generally accounting for most of the investing portfolio ...