Moody’s Investors Service has asked the U.S. District Court for the Southern District of New York to dismiss the remaining claim in a lawsuit alleging manipulation of credit ratings leading up to the financial crisis. In its motion to dismiss, Moody’s said that plaintiff Ilya Eric Kolchinksy’s second amended complaint fails to show that the rating agency used its electronic “ratings delivery service” to issue false ratings on MBS that later turned bad. In 2012, Kolchinsky, a former managing director at Moody’s, filed...

New legal requirements enacted in the state of New York in the wake of the financial crisis pose particular compliance challenges for mortgage servicers, according to a new report by analysts at S&P Global Ratings. The S&P team recently reviewed a series of laws the state legislature passed in June that attempts to address several issues related to “zombie” foreclosures, which refers to the phenomenon of a servicer initiating foreclosure on a vacant property but not going so far as to actually take title. Urban community activists complain such properties languish unsold for a prolonged period of time, contributing to neighborhood blight in communities least able to handle it – hence, state lawmakers decided to act.One resulting requirement “imposes conditions ...

Fitch Ratings released criteria for rating MBS backed by nonperforming loans late last week, saying it will cap ratings for such deals at “A” due to “the idiosyncratic and adverse-selection risk.” As mortgage performance has improved in recent years, issuance of MBS backed solely by nonperforming loans has been limited. However, Fitch said it considers a transaction as an NPL issuance if more than 10.0 percent of the collateral is 60+ days delinquent at the time of issuance. The rating service will require such MBS to meet a number of standards to receive a low investment-grade rating of “A” or “BBB,” including a sequential-pay structure and application of available funds to pay interest to the rated notes. “Absent these structural ...

Bank of America, Morgan Stanley and Wells Fargo are preparing to issue the first commercial MBS that will comply with risk-retention requirements, according to presale reports published this week. While industry participants continue to debate which type of risk-retention will be more commonly used, the pending $870.56 million MBS will include vertical retention. Wells Fargo Commercial Mortgage Trust 2016-BNK1 received provisional AAA ratings from Fitch Ratings, Kroll Bond Rating Agency and Standard & Poor’s. Fitch said the three originators contributing to the MBS will retain credit risk representing 5.0 percent of pool balance via the vertical retention option. Risk-retention requirements for commercial MBS take effect...

Two Harbors Investment and Five Oaks Investment separately announced plans to end their jumbo mortgage conduit operations due to profitability issues. “We believe that current and expected mortgage market conditions and competitive pressures will prevent us from growing this business to a scale that meets our long-term goals and financial expectations,” said Thomas Siering, Two Harbors’ president and CEO. The Two Harbors announcement came...

Marketplace lender Social Finance is preparing to issue a $480.55 million ABS backed by unsecured consumer loans, its second such deal to date. So far, 10 of its 12 securitizations have used student loans as collateral. According to a report by DBRS, SCLP 2016-2 consists of $425.88 million of class A notes and $54.67 million of B notes. The package is expected to price early next week, but at press time no information was available regarding the coupons. The class A notes received...

JPMorgan Chase is preparing to issue a $2.65 billion prime non-agency MBS, including a large share of mortgages eligible for sale to the government-sponsored enterprises. While company officials see promise in the new type of securities, industry participants offer mixed projections on whether other big banks will follow its lead. The planned Chase Mortgage Trust 2016-2 received AAA ratings from Fitch Ratings and Moody’s Investors Service. Mortgages eligible for sale to the GSEs account for 55.0 percent of the dollar volume backing the deal. As with the $1.89 billion Chase Mortgage Trust 2016-1 that priced in March, the bank will retain...

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...

Progress Residential is preparing to issue a new single-family rental security that will lead to the payoff of a $473.2 million deal issued by the firm in 2014. The payoff will mark the first time a single-family rental security has prepaid, according to industry analysts. The planned Progress 2016-SFR1 is a single-borrower single-family rental securitization that was initially planned to be backed by a $657.27 million loan secured by mortgages on 4,068 rental homes, according to ratings by Kroll Bond Rating Agency, Moody’s Investors Service and Morningstar Credit Ratings. A portion of the proceeds will fund the prepayment of Progress 2014-SFR1. The deal issued...

Ginnie Mae issuers produced a hefty $125.42 billion of new single-family mortgage-backed securities during the second quarter of 2016, according to a new Inside FHA/VA Lending analysis of MBS data. The government-insured market continued to run hotter than the Fannie Mae and Freddie Mac sector. Ginnie MBS issuance – including FHA’s home-equity conversion mortgage program – was up 31.1 percent from the first quarter, while single-family MBS issuance by the two government-sponsored enterprises rose 26.2 percent over the same period. Excluding HECM, Ginnie issuance was up 31.5 percent in the second quarter. While FHA forward mortgages continued to be the biggest source of collateral, the VA program actually produced a bigger gain, 42.4 percent, from the first to the second quarter. VA production saw a major boost in refinance activity, up 58.4 ... [Includes four charts ]