Although Redwood Trust’s soup-to-nuts approach to representations and warranties has dominated the fledgling recovery in jumbo mortgage-backed securities issuance, some experts think a shorter term alternative may gain popularity among issuers. It’s important for investors and rating services to anticipate putbacks in jumbo MBS, Peter Sack, a managing director at Credit Suisse, said during a panel session at the recent secondary market conference sponsored by the Mortgage Bankers Association ...

Issuers of non-agency mortgage-backed securities should disclose when they seek a rating from a firm and ultimately decide not to hire the firm, according to a variety of non-agency participants. “If one rating is 7 percent subordination and the other is 15 percent, we don’t need to accept the 15 percent subordination, but we do need to disclose the 15 percent subordination opinion to investors,” Martin Hughes, CEO of Redwood Trust, said this week at a roundtable hosted by the Securities and Exchange Commission ...

Standard & Poor’s was the most active rating service in the non-mortgage ABS market during the first quarter of 2013, according to a new Inside MBS & ABS analysis, while DBRS continued to dominate the non-agency MBS space. S&P rated a total of $31.9 billion of newly issued ABS during the first three months of the year, or 67.8 percent of total issuance. That was up from the company’s 58.1 percent share of ABS ratings for all of 2012. S&P was particularly strong in rating credit card ABS, covering 86.1 percent of that market after grading just 50.3 percent of last year’s card deals. Because nearly all public deals have multiple ratings, the sum of the ratings by firms exceeds...[Includes two data charts]

“The private-label market is showing new signs of life,” according to Standard & Poor’s, which predicted that banks are likely to increase their securitization of jumbo mortgages. In a report released late last week, S&P projected $14 billion in non-agency jumbo MBS in 2013. Redwood alone set a goal of issuing $7 billion in non-agency MBS this year and is on pace to exceed that volume, helped by a pending $425 million deal, its sixth of the year. PennyMac Mortgage Investment Trust is also aiming to issue a non-agency jumbo MBS in the Redwood mold in the third quarter of 2013. JPMorgan Chase and EverBank Financial issued...[Includes one data chart]

Credit quality for global structured finance securities fell for the sixth consecutive year in 2012, again led by U.S. residential MBS, according to Standard & Poor’s. Looking at downgrade and default trends from 1978 through 2012, S&P found that downgrades were less pervasive last year than in previous years. Nonetheless, the mild but slow global economic recovery continues to hurt the performance of MBS and other structured finance securities for the sixth straight year. Its lagging effect means that credit quality may continue to see moderate deterioration, the rating agency said. While poor credit quality appears...

Moody’s Investors Service said it would not have given its highest rating to the jumbo mortgage-backed security issued last week by JPMorgan Chase because of concerns about the deal’s representation and warranty framework and the lack of risk retention by Chase. DBRS, Fitch Ratings and Kroll Bond Rating Agency gave JPMorgan Mortgage Trust 2013-1 AAA ratings with credit enhancement of 7.40 percent on the top-rated tranche. The rating services said the credit enhancement on the deal was ...

Ginnie Mae issuance fell in the first quarter of 2013 but was easily offset by significant gains from a year ago, according to Inside FHA Lending’s analysis of FHA data. Mortgage-backed securities production at the government facility dropped 5.1 percent to $104.1 billion in the first quarter but increased 28.6 percent year-over-year , which was more than enough for an offset. The securities were backed mostly by FHA and VA loans with a combined total of $99.33 billion. Federally guaranteed rural housing loans totaling $4.84 billion were also in the mix. Wells Fargo and Chase Home Finance led the Ginnie Mae market with a combined ... [1 chart]

Applications for purchase mortgages surged last week as FHA borrowers rushed to get their applications in before April 1, when higher FHA annual insurance premiums took effect, according to the Mortgage Bankers Association’s latest weekly survey of mortgage loan applications. The boost in total purchase applications for the week ending March 29 was fueled by a nearly 7.0 percent increase in government-backed purchase applications, the MBA noted. “This [increase] was likely driven by borrowers applying for loans prior to the scheduled increase in FHA premiums that took effect on April 1,” said Mike Fratantoni, the MBA’s vice president of research and economics. “On a year-over-year basis, purchase applications are up about 4 percent, in line with the trend we are seeing in home sales volume.” The 10 percent annual premium increase, the third in two consecutive years, applies...

Moody’s Investors Service issued a “special comment” this week to warn that the new non-agency jumbo MBS issued by JPMorgan Chase would not have received a AAA rating from Moody’s, had the firm been asked to rate the deal. The rating service raised concerns about representations and warranties and a lack of risk retention on the deal.

The key to advancing tomorrow’s big picture housing finance reform should begin today through a series of smaller steps starting with targeted, nearly ready-to-go reductions to Fannie Mae’s and Freddie Mac’s credit risk, according to a proposal by Moody’s Analytics.