The Securities Industry and Financial Markets Association advised Capitol Hill that the successful government-sponsored enterprise credit risk-sharing programs could be improved to increase liquidity and investor interest. In a letter to Sen. Richard Shelby, R-AL, chairman of the Senate Banking, Housing and Urban Affairs Committee, the Wall Street group said, “Up-front risk-sharing could make housing finance more efficient and sustainable by allowing the GSEs to achieve day-one risk transfers without having to warehouse credit risk until it can be distributed in a back-end credit transfer transaction.” It added...

A precedent-setting court case decided in May has disrupted the MBS and ABS markets, according to the Securities Industry and Financial Markets Association and the Structured Finance Industry Group. The trade groups filed an amicus brief to the Supreme Court of the United States late last week, calling for the court to hear an appeal of the ruling in Madden v. Midland Funding. In May, the U.S. Court of Appeals for the Second Circuit ruled that federal preemption under the National Bank Act doesn’t apply to nonbanks that purchase loans from banks. The Madden ruling subjects nonbank purchasers of loans originated by banks to state usury laws. If a bank’s preemption from such laws isn’t transferred when a nonbank acquires a loan originated by a bank, the loan can be...

The U.S. residential MBS sector will continue its slow, steady recovery in 2016 amid a host of challenges, showing further improvement in housing fundamentals, credit quality and mortgage performance, according to analysts. The challenges to MBS structured financing boil down to the following: tapering of Federal Reserve investment in MBS, MBS supply and demand, interest rates and prepayment risk. Fitch Ratings notes...

A growing number of loans are being dropped from commercial MBS deals before they reach securitization, according to Fitch Ratings. While most of the loans dropped had lower balances, under $20 million, the rating service is concerned that the unusually large amount of loan drops over the last 12 months could point to a lack of due diligence by lenders prior to sending the initial loan information to rating agencies or B-piece buyers. For example, in 28 Fitch-rated deals for the 12-month period ending June 30, 2015, about 1,000 loans were dropped, the rating service said. That number represented 30 percent of the final transaction amount. “There is...

Investor demand for rated securitizations backed by re-performing and nonperforming mortgages is increasing both in the U.S. and in Europe, according to senior analysts at Moody’s Investors Service. The analysts noted a strong pipeline of RPLs in the U.S. securitization market as investors purchase NPLs and turn them into re-performing loans. Max Saury, a senior analyst with Moody’s Structured Finance Group, estimates the current NPL market at $300 billion, excluding nonperforming non-agency MBS. There have been...

The average daily trading volume in agency MBS fell to $180.2 billion in November, hitting a new low for the year, according to the Securities Industry and Financial Markets Association. Such a low reading is indicative of a lack of liquidity in the market, but by now, investment bankers and policy makers are no longer wringing their hands about the number. The complacency, in part, is fueled...

An estimated $117.1 billion in VA-guaranteed home loans went into Ginnie Mae mortgage-backed security pools during the first nine months of 2015, according to an Inside FHA/VA Lending analysis of agency data. The totals for securitized VA purchase and refinance loans in Ginnie pools were almost even - $57.8 billion and $57.6 billion, respectively. Modified VA loans were also included in the total. The volume of VA-backed Ginnie securitization during the first nine months of 2015 far exceeded the $109.5 billion reported for all of 2014. Lenders attributed the production spike to a growing population of active-duty military personnel and veterans returning from foreign deployment and to better outreach efforts. VA originations accounted for 12.1 percent of loans underlying Fannie Mae, Freddie Mac and Ginnie Mae MBS and 25.2 percent of insured loans in those pools. The securitized VA loans showed an ... [ 1 chart ]

Approximately $191.8 billion in FHA-insured mortgage loans were securitized during the first nine months of 2015, surpassing the $158.1 billion of FHA loans that were placed in Ginnie Mae pools last year, agency loan-level data show. Securitized FHA purchase loans accounted for $111.7 billion of Ginnie Mae mortgage-backed securities issued over the same period. FHA refinance securitization totaled $66.8 billion. Modified FHA loans were also included in Ginnie MBS totals. The FHA loans in Ginnie MBS had an average loan-to-value ratio of 92.9 percent and an average FICO score of 677.5 percent, reflecting the single-family program’s traditional borrower base. The loans had an average debt-to-income ratio of 39.8 percent. FHA loans accounted for 19.8 percent of loans that underlie Fannie Mae, Freddie Mac and Ginnie Mae MBS. On the other hand, the same loans accounted for 41.2 percent of insured loans in ... [ 1 chart ]

HUD-IG Issues Industry Warning Against HECM Refi Scam. The inspector general of the Department of Housing and Urban Development has issued an alert to warn lenders, originators and sponsors about fraudulent appraisals that are being used to inflate reverse loan amounts in order to qualify borrowers for HECM financing. Auditors have reviewed HECM refinances over the last several years and have found indications of fraud in hundreds of HECM loans, the IG said. Specifically, appraised values were inflated by 60 to 100 percent or more above the collateral’s actual market value. FHA Announces Lender Recertification Webinar. The FHA will present an online webinar that will assist FHA lenders with the upcoming lender recertification process. Scheduled for Dec. 15, 2015, 2 p.m. to 4 p.m., EST, the webinar will provide details and tips on how FHA lenders can submit an ...

Separate appeals courts this week vacated legal victories that the federal government achieved in the aftermath of the financial crisis. The cases involve former officials at State Street Bank and Trust and a former MBS trader at Jefferies & Company. In 2014, commissioners of the Securities and Exchange Commission voted 3-2 to reverse a ruling by the SEC’s Chief Administrative Law Judge involving James Hopkins, a former vice president and head of North American product engineering at State Street, and John Flannery, a former CIO at the bank. The ALJ had dismissed...