While the net supply of non-agency mortgage-backed securities continues to run off, holdings by banks and thrifts actually increased in the third quarter of 2013, according to a new ranking and analysis by Inside Nonconforming Markets. The entities held $145.83 billion in non-agency MBS at the end of the third quarter of 2013, up 2.2 percent from the previous quarter. Banks and thrifts held 17.8 percent of non-agency MBS outstanding at the end of the third quarter. JPMorgan Chase is the ... [Includes one data chart]

The consensus among speakers at the ABS Vegas conference this week appeared to be that the MBS market is unlikely to change significantly this year. “The status quo is comfortable,” said Larry White, an economics professor at New York University’s business school. Issuers of non-agency MBS are working on reducing the government-sponsored enterprises’ dominance of the secondary market for mortgages, but the chicken-and-egg problem persists. New non-agency issuance has ground to a standstill, and Congress has been slow to move housing-finance reform legislation. In the meantime, industry observers expect...

The Structured Finance Industry Group announced this week that it will convene a taskforce to establish standardized representations and warranties for new non-agency MBS. The “Project RMBS 3.0” effort will involve a wide variety of industry participants in an effort to attract investors to non-agency MBS. If the effort sounds familiar, that’s because the American Securitization Forum issued benchmark reps and warrants in 2009 as part of its Project Restart initiative. “We want to resolve these issues once and for all,” said Eric Kaplan, managing director of Shellpoint Partners and one of the leaders of Project RMBS 3.0, during this week’s ABS Vegas conference sponsored by the SFIG and Information Management Network. He said...

Non-agency MBS issuance declined by 30.6 percent from the third to the fourth quarter of 2013 as the plucky jumbo securitization sector ran out of gas. The market produced $4.94 billion of new non-agency MBS during the fourth quarter, according to a new Inside MBS & ABS analysis and ranking, the weakest output of the year. Although there were some gains in the scratch-and-dent and re-securitization sector – markets that are almost all private placements – production of jumbo MBS fell by 71.4 percent. Even with the late fizzle, 2013 produced...[Includes three data charts]

The number of distressed residential loans backing non-agency mortgage securities dropped by 5 percent in the third quarter of 2013 and by 20 percent from the prior year. This trend, however, could lose some steam in the months ahead. According to the latest report from Morningstar Credit Ratings, clearing the distressed inventory in the non-agency MBS market might take a little longer because the pace of decline has slowed significantly. The number of liquidations has dropped by 39 percent, with approximately 891,000 properties with distressed mortgages still in inventory, it added. In addition, total distressed liquidation as a percentage of total paid-off loans continues...

A Manhattan federal judge last week ruled that Bank of New York Mellon may proceed with repurchase claims against a General Electric unit in connection with a $900 million non-agency MBS. BNYM, in its capacity as trustee for a pool of loans known as GE-WMC Mortgage Securities Trust 2006-1, filed suit against GE Mortgage Holdings and WMC Mortgage LLC in New York state court in 2012, where the defendants promptly moved the legal action to federal court to dismiss it. Following the court’s denial of the defendant’s motions to dismiss, GE Mortgage filed...

The statute of limitations for filing representation-and-warranty claims on non-agency MBS starts when a deal is issued, not when a defective loan isn’t cured, according to a recent ruling by the appellate court in New York. Industry analysts suggest that the ruling will limit rep-and-warrant claims on vintage non-agency MBS as well as future claims on recently issued jumbo MBS. In December, the appellate division of New York’s Supreme Court dismissed ACE Securities Corp. v. DB Structured Products. The lawsuit was brought by a trustee on behalf of investors against Deutsche Bank, the issuer of ACE 2006-SL2, a non-agency MBS issued in 2006. The investors, along with HSBC Bank, the trustee, were looking to enforce rep-and-warrant claims in 2012. New York imposes...

The Dutch State Treasury Agency this week is auctioning $4.3 billion in non-agency MBS once held by ING, which will leave the government entity still holding about $2.2 billion of securities. The sale represents less than 1.0 percent of outstanding non-agency MBS, and it was expected to have little impact on pricing for these assets. Bids on the portfolio were...

Citadel Loan Servicing, arguably the largest active originator of nonprime mortgages, plans to move forward with its first non-agency MBS by the middle of this year. Company founder and CEO Dan Perl told Inside MBS & ABS that the firm has already picked a custodian as well as what he calls a “watchdog” to review the collateral. The watchdog in question appears to be Clayton Holdings, said one source, but officials at both firms would not discuss the matter. Perl declined...

Jumbo MBS issuance isn’t likely to revive in the first quarter, and some market participants are starting to wonder if any new deals will get done by the end of March. With January almost at the mid-point there is talk that issuers – both active and wannabes – are shifting to a strategy of staying in the jumbo business as whole-loan traders as opposed to issuers. For now, it appears...