Part of the cost to issue non-agency MBS under the new rules of the road is a stronger commitment to due diligence reviews of the collateral backing the transaction, and experts note that the process is more complex than just hiring one of the handful of companies that provide these services. “There are three basic constituencies you need to satisfy during third-party reviews,” said Eric Kaplan, managing director of mortgage finance at Shellpoint Partners during a session at the Mortgage Bankers Association National Secondary Market Conference. “There’s the law, the ratings agencies and investors...

Fitch Ratings has combined its criteria for rating residential mortgage originators and third-party due diligence involved in non-agency MBS issuance. The company said the move does not involve any material changes to its rating methodology. All originators contributing loans to non-agency MBS rated by Fitch are subject to periodic reviews by the rating service that can lead to adjustments in loss estimates for the deals or even cause the company not to rate a transaction at all. The rating service will look at the performance history of the loan originator, including repurchase requests...

Fitch Ratings has placed 157 residential MBS classes serviced by Residential Capital on Rating Watch Negative as the ailing subsidiary of Ally Financial slid closer to bankruptcy. The rating action came on the heels of a Fitch downgrade of ResCap’s issuer default rating to ‘C’ from ‘CCC’ on April 18. In addition, Fitch placed GMAC Mortgage’s servicer rating on Rating Watch shortly before the adverse rating action against ResCap. Fitch said the coordinated rating actions reflect the current uncertainty for the servicing portfolio due to the growing possibility of a bankruptcy or debt restructuring for...

Moody’s Investors Service has not rated a non-agency MBS since the end of 2010, but the company has made up for it by taking a lead role in the non-mortgage ABS market, according to a new ranking and analysis by Inside MBS & ABS. Moody’s rated 37 non-mortgage ABS issued during the first quarter of 2012, a total of $33.85 billion in new issuance. That represented 84.5 percent of the market by dollar volume, an increase from the 70.4 percent market share the company garnered for all of 2011. Its deepest penetration was in the business loan category, which includes dealer...(Includes one data chart)

DBRS this week said seven firms are approved to provide third-party due diligence on non-agency mortgage-backed securities rated by the company. The companies are Allonhill, American Mortgage Consultants, Clayton, Digital Risk, Opus, RMG and R.R. Donnelley. Meanwhile, CoreLogic announced last week that Standard & Poor’s has approved the company as a third-party due diligence provider for non-agency MBS ... [Includes four briefs]

Moody’s Investors Service has come up with a new metric that evaluates how much cash a subprime mortgage servicer generates from loan modifications and liquidations versus how much it loses through loss mitigation and inaction on delinquent loans. A quick resolution may be the single most decisive factor in maximizing cash flow, whether it’s an effective loan modification or an outright foreclosure and liquidation. “It’s better to do it quickly,” said Peter McNally, a vice president and senior analyst at Moody’s who contributed to the development of the metric. “A modification is good if you make the...

Credit Suisse has joined Redwood Trust to push the comeback of the non-agency MBS sector with a new public issue, while Springleaf Financial has put together another securitization backed by seasoned subprime mortgages. The Credit Suisse transaction, CSFB Mortgage Securities 2012-CIM1, is backed by $1.4 billion of prime residential mortgages, 82 percent of which had been originated by MetLife Home Loans. The deal sparked some controversy among rating services as Fitch Ratings questioned whether it had enough credit enhancement to cover risks related to property valuations on many of the...

Credit rating agencies (CRAs) should return to their market roots and stop being a regulatory tool for public policy, according to a Moody’s Investors Services top executive. In recent remarks to the American European Community Association, Ray McDaniel, chief executive officer of Moody’s Corp., noted that credit ratings have grown from limited use by banks in the 1920s to something that regulators and politicians have relied upon to serve public-policy objectives for the past several decades. McDaniel said such reliance has got to stop. He said regulatory policies should be geared towards reducing any...

Redwood Trust has packaged its fourth non-agency jumbo MBS of the past two years and achieved the lowest credit-enhancement requirement during that span thanks largely to a more appealing geographic mix of properties backing the loans. Sequoia Mortgage Trust 2012-2 looks a lot like the three previous jumbo deals Redwood has issued in its solo effort to re-ignite the non-agency MBS market. In some ways, the collateral is slightly less pristine than some of the earlier transactions, although all four have been backed by very high quality prime loans. Credit enhancement for the AAA-rated classes is 7.15...

PennyMac Loan Services has some unique loss-mitigation strategies, but Moody’s Investors Service warned this week that some of the company’s approaches are risky. Among other issues, PLS can require borrowers that otherwise would not qualify for a loan modification to deed their property to the servicer if the mod does not succeed. “While this approach can improve loss mitigation performance or reduce timelines, Moody’s believes these programs could result in borrowers and regulators challenging this practice as well as headline risk to the company,” the rating service said. PLS has yet to employ the tactic. The warning from Moody’s ...