A planned jumbo mortgage-backed security from Credit Suisse received some criticism from Fitch Ratings due to concerns about the origination practices of some of the lenders that contributed mortgages to the deal. The rating service increased its default assumptions for the $405.27 million CSMC 2015-1. “Fitch applied a conservative treatment – higher probability of default – due to its limited visibility to the individual lender origination practices ...

The FHA has delayed the effective date of new guidance that will require reverse mortgage lenders to perform a financial assessment of applicants for a Home Equity Conversion Mortgage. The FHA indicated that the change was necessary to allow vendors and the Department of Housing and Urban Development to align their respective software before the new system can be operational. Those familiar with the technology said delivering the required system enhancements should not take long. The FHA said a new effective date should be expected within 30 to 60 days of the original March 2 effective date. It will be announced in a new mortgagee letter, the agency added. The new guidance requires lenders to evaluate HECM borrowers’ willingness and capacity to meet their obligations and to comply with program requirements. “Financial assessment” means doing a much more ...

The Department of Veterans Affairs expects to have a finalized Qualified Mortgage (QM) rule by May to help clear up some issues that have arisen since the agency issued an interim final rule last spring. The VA issued the interim QM rule for comment on May 9, 2014, to define which VA loans will have QM status under the ability-to-repay (ATR) rule. Issued by the Consumer Financial Protection Bureau, the ATR rule provided temporary QM status to loans eligible for FHA insurance and guaranties by the VA and the Department of Agriculture’s Rural Housing Service. Eligible government-backed loans must be 30-year fixed-rate with no interest-only, negative amortization or balloon features. Total points and fees must not exceed 3 percent of the total loan amount for loans of $100,000 or more. Loans that meet the definition of a temporary VA-eligible QM are considered as in compliance with the ATR rule. They are designated as “safe harbor QMs,” provided they are not ...

Proponents of the non-agency MBS market continue to work on initiatives to revive the market, with progress somewhat slow but steady. The Treasury Department and the Structured Finance Industry Group are facilitating separate efforts to entice investors to buy new non-agency MBS. At the ABS Vegas conference sponsored by the Structured Finance Industry Group and Information Management Network this week, Olga Gorodetsky, a senior policy advisor at the Treasury, said there’s no timeframe for when the benchmark non-agency MBS the Treasury is trying to facilitate might be issued. “It will be market driven,” she said. Gorodetsky said...[Includes one data chart]

Standard & Poor’s emerged as the top rating service in both non-agency MBS and non-mortgage ABS securitizations in 2014, according to a new Inside MBS & ABS ranking. S&P rated $8.91 billion of non-agency MBS last year, or 25.4 percent of total issuance. Rating information is not available on most scratch-and-dent transactions and re-securitizations that are typically issued as private placements. S&P’s market share was down from 40.0 percent of non-agency MBS issued in 2013, when there were more transactions with multiple ratings. DBRS, which reports its ratings on re-securitizations, actually was involved...[Includes two data charts]

The Department of Justice and other allied parties this week reached a $1.375 billion settlement with Standard & Poor’s to resolve allegations that the firm’s investment-grade ratings misled investors into buying securities backed by badly underwritten mortgages. The agreement resolves the DOJ’s 2013 lawsuit against S&P and its parent, McGraw Hill Financial Inc., along with the suits filed by 19 states and the District of Columbia. Each of the lawsuits alleges that investors incurred substantial losses on residential MBS and collateralized debt obligations that carried S&P’s ‘AAA’ ratings, which effectively masked their true credit risks. S&P was accused...

If issuers were to include agency-eligible mortgages with slightly less than pristine underwriting standards in new non-agency mortgage-backed securities, the deals could receive ratings with credit enhancement levels similar to the levels on recent jumbo MBS, according to the results of an exercise released this week by the Treasury Department. Treasury asked six rating services to assign ratings to hypothetical non-agency MBS comprised of $19.75 billion of mortgages ...

After loosening every month for more than a year, underwriting on jumbo mortgages started to tighten in mid-2014, according to new data from the Mortgage Bankers Association and AllRegs. In the past three months, jumbo underwriting has started to loosen again and standards are the loosest they have been since early 2011.Angel Oak Mortgage Solutions announced that it launched a mini-correspondent offering for non-agency nonprime ... [Includes three briefs]

Sales of mortgage servicing rights by big banks will continue to be driven by the desire to reduce the handling of delinquent mortgages – not by Basel III capital requirements, according to analysts at Moody’s Investors Service. Nonbank servicers that have grown in recent years often cite Basel capital requirements as a significant factor in bank sales of MSRs. Warren Kornfeld, a senior vice president at Moody’s, noted that Bank of America, Citigroup and JPMorgan Chase were active sellers of MSRs in recent years. “We believe the sales were primarily motivated by their desire to reduce credit-impaired servicing volume,” he said. Under Basel III, banks face...

Standard & Poor’s surveillance of seasoned non-agency mortgage-backed securities backed by jumbo mortgages and Alt A loans played a factor in the $77 million settlement the rating service reached this week with regulators. The Securities and Exchange Commission and state attorneys general for New York and Massachusetts largely focused their settlement with S&P on ratings for commercial MBS. Just $1.0 million of the settlement concerned surveillance of non-agency MBS ...