MBS investments by most of the nation’s publicly traded mortgage real estate investment trusts continue to be in a holding pattern these days as they figure out what to do in an environment of declining interest rates and accelerating prepayment speeds. Market leader Annaly Capital Management held $64.9 billion of agency MBS at midyear, down ever so slightly from the prior quarter. Compared to June 2015, Annaly’s MBS portfolio was off 4.1 percent. American Capital Agency Corp., Annaly’s closest competitor in terms of REIT MBS investing, saw...

Freddie Mac will publish a new set of disclosures to help the market track the exchange of its legacy MBS with a 45-day payment delay to a 55-day cycle under the new Single Security, according to a new update from the government-sponsored enterprise. A key disclosure involves the creation of “mirror securities” that help investors track how much of an existing MBS has been exchanged for the new securities. Mirror securities will be created for Freddie’s current participation certificates as well as second-level Giants that are comprised of PCs. Before new Single Securities are created, Freddie will create...

Nonbank jumbo originators may soon find themselves at a pricing disadvantage to depositories thanks to recent events beyond their control: two jumbo conduits calling it quits and updated regulatory language that offers no comfort when it comes to curing “TRID” errors. Industry veteran Bill Dallas, who runs nonbank lender Skyline Home Loans, Calabasas, CA, put it bluntly, saying: “Banks appear to be the big jumbo winners – Union Bank and others.” He said jumbo production is a low-margin business but a necessity in California. The CEO noted...

Pricing for new jumbo mortgage-backed securities has improved recently, prompting Redwood Trust to issue a new transaction relatively quickly. Redwood issued its first jumbo MBS of the year, a $344.89 million deal, in early June. While the company issued an average of one jumbo MBS per month in 2013, the real estate investment trust has largely shifted to whole-loan sales of jumbos in recent years due to better pricing for such transactions. At an investor conference ...

A new tax policy proposed by the Internal Revenue Service in April aimed at corporate “earnings stripping” tax avoidance maneuvers could cause significant problems for the MBS and ABS markets, according to industry participants. The proposed rule from the IRS under Section 385 of the Internal Revenue Code of 1986 would treat related-party debt as equity, aiming to reduce internal restructurings at foreign corporations by establishing new taxes. The Structured Finance Industry Group’s Tax Policy Committee submitted...

The secondary market for mortgages with TRID mortgage-disclosure errors has stayed fairly constant the past few months, but there are new signs the business is getting a bit long in the tooth. According to interviews with investors and brokerage firms involved in the scratch-and-dent market, the auction of mortgages with disclosure problems (of all varying degrees) continues, but fewer sales are closing. Mid America Mortgage, Addison, TX, one of the most active buyers in the space, said...

MBS prepayment speeds are likely to climb higher because of falling mortgage interest rates, but industry analysts are undecided about how big a factor borrower burn-out will be. The Mortgage Bankers Association said its refinance loan application index climbed to 2575.9 in the week ending July 1, its highest level since early 2015. The index fell last week to 2295.8. The average interest rate on a 30-year, fixed-rate conventional conforming mortgage fell...

A New Mexico jury handed the Securities and Exchange Commission a split verdict in a 2008 financial crisis-related lawsuit against two senior executives of the now-defunct Thornburg Mortgage who were accused of fraud and misrepresenting the financial condition of the company. The jury found for defendants Larry Goldstone, former Thornburg CEO, and Clarence Simmons, former chief financial officer, on half of the counts but failed to reach a verdict on the most significant charges based on fraud and lying to the company’s outside auditors. In the lawsuit, the SEC alleged...

The costs and benefits of a deal agent will vary based on loan characteristics, according to a new analysis by Fitch Ratings. Costs for jumbo mortgage-backed securities will be relatively low, while costs for nonprime MBS will be higher, along with potentially greater benefits when assessing the representations and warranties on a deal. Non-agency MBS issuers continue to work toward including a deal agent in new transactions as some investors have called for the feature ...

Investors in non-agency mortgage-backed securities serviced by Ocwen Financial released a report this week calling for Standard & Poor’s to upgrade Ocwen’s servicer ratings. In June 2015, S&P downgraded Ocwen Loan Servicing’s servicer ratings to “below average,” citing regulatory issues and investor scrutiny along with concerns about internal audits at Ocwen. The downgrade is a focus for some investors because some of the non-agency MBS serviced by Ocwen have ...