Wells Fargo fell a notch as PennyMac raced to the top to become the leading VA jumbo securitizer for the first quarter of 2017 – a period in which VA jumbo loan securitization took a sharp nose dive. The volume of VA jumbo loans securitized during the first three months plunged 36.8 percent, compared to the meager 2.0 percent decline seen in the fourth quarter. The drop reflected a 32.9 percent drop in jumbo mortgage production during the first quarter, along with similar large drops in virtually every product segment in the mortgage market, according to an analysis by Inside FHA/VA Lending affiliate Inside Mortgage Finance. The agency jumbo market was down 39.1 percent from the fourth quarter despite the bump up in high-cost loan limits to $636,150, an increase of $10,650 that became effective in January. All components of the agency jumbo market took big hits in the first quarter, including ... [ Charts ]

The development of a deal agent for new non-agency MBS has spanned years, with industry participants working toward the best way to compensate the new transaction party, among other issues. A deal agent would have a fiduciary duty to investors, oversee enforcement of representations and warranties, and monitor various participants in a security. The new role is significant because some major investors say that after suffering major losses on MBS issued before the financial crisis, a deal agent is required for them to buy new securities. Clayton Holdings was...

Investors in nonprime MBS may be more vulnerable to fraudulent or defective mortgages compared to prime transactions because of deficiencies or inadequacies in the related representation-and-warranties frameworks, according to a new report from analysts at Moody’s Investors Service. “The collateral backing these transactions is riskier than the loans in post-crisis prime jumbo RMBS, which also generally use stronger frameworks,” the report said. For starters, “Transactions in the re-emerging non-prime RMBS sector are...

One of the most significant variables industry participants are working to address in terms of introducing a deal agent into non-agency mortgage-backed securities is the fee structure. Issuers are trying to balance paying for the services provided by a deal agent without diverting too much cash flow from investors in non-agency MBS. The fee structure will also play a key role in how rating services treat MBS that have a deal agent, with issuers looking for favorable treatment ...

Ginnie Mae hit a milestone in the MBS market during the first quarter of 2017, edging past Freddie Mac to become the second-largest supplier of single-family MBS in the world. A new Inside MBS & ABS analysis reveals $1.705 trillion of Ginnie 1-4 family MBS outstanding at the end of March, a 2.2 percent increase in just three months. Meanwhile, outstanding single-family Freddie MBS rose 0.7 percent to $1.703 trillion. Both Ginnie and Freddie accounted...[Includes two data tables]

This week, the Federal Reserve’s Open Market Committee provided a bit more information on the process it plans to follow in shrinking the size of its massive balance sheet, once it decides the time is right to finally begin. “Provided that the economy evolves broadly as the committee anticipates, we currently expect to begin implementing a balance sheet normalization program this year,” Fed Chair Janet Yellen said in her post-meeting press conference. The hope is to initiate an incremental and largely predictable decline in the U.S. central bank’s securities holdings. The FOMC intends...

The Trump administration wants to pare back regulations that inhibit the non-agency MBS and ABS market and tilt current securitization economics that favor the government-sponsored enterprises over private issuers. “In order to revitalize a responsible [private-label securities] market, it is important to improve incentives for issuers through reasonable reductions in costs and regulatory burdens,” the Treasury Department said in a new report released this week. In particular, it aimed at adjusting relative economics for the government-sponsored enterprises and FHA/VA mortgage programs. On the regulatory side, Treasury recommends...

The average daily trading volume in agency MBS fell to $185.1 billion in May, the lowest reading of the past 17 months, according to the Securities Industry and Financial Markets Association. Year-to-date, the average is still ahead of last year’s pace but not by much: $204.2 billion compared to $201.9 billion for 2016. But these are interesting times for investors as both bonds and stocks continue to rally near new highs. Earlier this week, the yield on the benchmark 10-year Treasury fell to 2.12 percent, the lowest reading since the November election. It’s...

The U.S. Court of Appeals for the Fifth Circuit rebuffed arguments that would have subjected mortgage lenders and other secondary-market participants to increased liability under the Equal Credit Opportunity Act. In a published opinion that appeared in the Banking Law Journal, the Fifth Circuit court rejected plaintiffs’ argument that mortgage investors that promulgate discriminatory lending guidelines could be held liable as the original creditor. ECOA prohibits...

Mortgage real estate investment trusts are expressing optimism about investment opportunities in agency MBS despite tighter spreads on credit assets, according to industry analysts at a recent mortgage finance conference in New York City. Mortgage REITs were positive on investment opportunities and believed that interest rate increases were likely to be moderate in the months ahead, said analysts with Keefe, Bruyette & Woods, which hosted the conference. Industry executives, however, noted...