This week, Ginnie Mae issued an all-participants memo dictating new standards for firms seeking to become issuers, including the stipulation that applicants submit to a corporate credit evaluation. Ginnie said the financial exercise will be “similar to those employed by credit rating agencies.” The evaluation will determine whether an applicant is qualified to be an issuer or whether additional criteria should be imposed even if the basic standards are met. Applicants that rely on a subservicer arrangement will be scrutinized even more. The bulletin also notes that, effective immediately, the agency is implementing new notification requirements for MBS issuers engaged in “certain subservicer advance or servicing income agreements, which do not require prior Ginnie Mae approval, but can impact an issuer’s ongoing liquidity position and financial obligations.” While Ginnie currently permits subservicers to advance ...

Increasingly worried about the financial condition of its largest nonbank issuers amid declining market conditions, Ginnie Mae in late October shot off a liquidity letter to 14 companies, asking them to develop contingency plans. The identity of the firms was not revealed to Inside FHA/VA Lending, but it’s no secret which companies rank among the top echelon of issuer/servicers. The five largest nonbank Ginnie MBS servicers as of Sept. 30 are PennyMac Financial Services, Lakeview Loan Servicing, Freedom Mortgage, Quicken Loans and Mr. Cooper. According to the letter, a copy of which was obtained by this publication, Ginnie wants the companies to develop strategies to right-size their operations. One of the agency’s goals is to lay the groundwork for financial stress tests that all issuer/servicers eventually must meet. Ginnie expects to sit down with the executive management teams of the ...

Fitch Ratings issued a commentary this week criticizing other rating services for the preliminary ratings they made on a non-agency MBS from Galton Funding. The company also suggested that it will increase its output of unsolicited commentary due to “late-cycle credit behavior.”

Top-notch ratings assigned by three firms to a non-agency mortgage-backed security from Galton Funding prompted criticism from Fitch Ratings, which didn’t rate the issuance. The planned $452.7 million Galton Funding Mortgage Trust 2018-2 diverges from traditional non-agency MBS in its treatment of unpaid interest from delinquent mortgages. Fitch suggested that the change to the deal structure was so significant that it wouldn’t rate the transaction. Fitch noted that losses from unpaid ...

Fitch Ratings is now giving a more detailed assessment of MBS due diligence firms. This week, the company introduced a tiered rating system to replace the previous designations used for classifying third-party reviewers conducting due diligence on new non-agency MBS.

FHA home-equity conversion mortgages have dominated originations of reverse mortgages but tighter underwriting requirements on HECMs are expected to prompt issuance of non-agency mortgage-backed securities backed by conventional reverse mortgages, according to industry analysts. “Many originators that were solely dependent on HECM originations have begun to diversify into jumbo, uninsured, proprietary reverse mortgages, which allow higher proceeds amounts than HECMs,” ...

DBRS was the most active rating service in the non-agency MBS market during the first six months of 2018, according to a new Inside MBS & ABS analysis. DBRS rated 26 non-agency MBS totaling $14.08 billion during the first half of the year, which represented 43.5 percent of total issuance. Its market share was up 4.0 percentage points from 2017. Fitch Ratings grew its market share in rating non-agency MBS, which rose from 31.0 percent last year to ... [Includes two data charts]

Longer auto loan terms and softer collection practices by some lenders are slowing amortization schedules and backloading losses in certain subprime auto loan ABS, said S&P Global Ratings.

Flagstar Bank looks to have found an agreeable due diligence sampling rate for loans in its prime non-agency mortgage-backed securities. The company is preparing to issue a $476.1 million prime non-agency MBS, according to presale reports published last week. It’s the second issuance in a row from Flagstar where 30.0 percent of the loans were subject to third-party reviews. Only 20.0 percent of the loans in a $704.1 million deal Flagstar issued in April were subject to ...

Rating services are divided on whether the income documentation used by Caliber Home Loans qualifies as full documentation. The differences are apparent in a pending $342.6 million issuance from Lone Star Funds, which is stocked with mortgages from Caliber. According to Fitch Ratings, Lone Star is the only current issuer of nonprime MBS to keep mortgages with nontraditional income-documentation out of its deals. The rating service said 99.4 percent of the dollar volume of the loans ...