It looks like Fannie Mae is taking advantage of an opening in the marketplace to unload some of its legacy non-agency residential MBS. Fannie is moving to divest itself of $1.1 billion in a transaction that was listed this week and expected to trade by week’s end, according to multiple market sources. After the Federal Housing Finance Agency told the government-sponsored enterprises in March to begin selling off at least 5 percent of their illiquid assets, the first round of liquidations took place in mid-May, as Freddie got rid of about $1.0 billion in seasoned non-agency RMBS, with Fannie subsequently selling approximately $2 billion of its multi-family commercial MBS. Round two began...

A subsidiary of Nomura Holdings is working on issuing a non-agency jumbo mortgage-backed security comprised solely of originations by First Republic Bank. The pending deal is set to receive a AAA rating from Kroll Bond Rating Agency, while Fitch Ratings warned that the proposed credit enhancement levels on the deal are too low for a AAA rating. The $440.08 million NRP Mortgage Trust 2013-1 is structured to include credit enhancement of 7.60 percent on the tranche with a AAA rating from KBRA. Fitch said ...

Beginning Jan. 1, capital requirements for bank holdings of certain non-agency mortgage-backed securities will begin to increase. The changes were included in the Basel III reforms approved by federal banking regulators last week. The Basel III final rule includes the simplified supervisory formula approach in lieu of the use of credit ratings to determine capital requirements for holdings of non-agency MBS. The SSFA relies on the 90+ delinquency rate, risk weights of the underlying exposures ...

Investors in new non-agency jumbo mortgage-backed securities are particularly concerned about representations and warranties regarding mortgage underwriting. Investors at a recent roundtable hosted by Standard & Poor’s stressed that particular risks should be borne by the party with the best information. “Since originators and arrangers are in a better position to ascertain the true quality of the loans, [investors said] reps and warrants should serve to protect investors from risks arising from ...

Republicans in the House this week detailed their plans for legislation to replace the government-sponsored enterprises with a mortgage securitization system that relies almost entirely on non-agency transactions. The “Protecting American Taxpayers and Homeowners Act” would do away with Fannie Mae and Freddie Mac and eliminate or delay a number of regulatory reforms in an effort to increase non-agency participation in housing finance. “The current system is a government monopoly run by ...

Some 231 non-agency mortgage-backed securities serviced by Nationstar Mortgage took nearly $1.0 billion in losses recently due to accounting for principal forbearance that occurred in previous years. Nationstar acquired the mortgages from Aurora Bank and said the revisions were made to remove inconsistencies in the reporting of previously forborne amounts. The revised losses follow a similar action by Ocwen Financial. Fitch Ratings said the servicers don’t anticipate similar significant ... [Includes two briefs]

Credit Suisse and Shellpoint Partners decided to damn the torpedoes and issue a total of three non-agency jumbo MBS at the end of the second quarter of 2013 despite concerns about investor appetite. The Shellpoint MBS was a proof-of-concept affair, while at least one of the Credit Suisse deals appears to be aimed at unloading seasoned originations from one lender. The three deals totaled $1.10 billion. Analysts at Bank of America Merrill Lynch said...

Issuers of new non-agency MBS continue to resist requests from investors to standardize reps and warrants for new issuance. Issuers suggest that investors will eventually differentiate pricing between deals based on reps and warrants, but it hasn’t happened yet. “Securitization platforms do – and will likely continue to – differ in terms of the scope of the reps and warrants provided,” according to analysts at Standard & Poor’s. “While standardizing reps and warrants would be a step towards improving transparency in the residential MBS market, the new issue jumbo market has shown substantial diversity even with relatively few recent transactions.” S&P recently hosted...

Credit unions held a total of $107.1 billion of MBS in their portfolios at the end of the first quarter of 2013, according to a new Inside MBS & ABS analysis and ranking of call report data. That was up 4.9 percent from the previous period, a relatively strong increase in a market where the supply of MBS outstanding has barely budged and the Federal Reserve represents a huge competitor for new issuance. Compared to a year ago, credit union MBS holdings were up 10.9 percent, while the total MBS market actually declined by 1.4 percent. Credit unions for the most part have ignored...[Includes one data chart]

The Federal Reserve decided against instituting new mortgage risk weightings in issuing its Basel III final rule this week, a decision that will likely make it easier and cheaper for financial institutions to hold onto their legacy non-agency MBS and thereby reduce the pressure they may feel to deleverage their balance sheets. “In light of new regulations designed to improve the quality of mortgage underwriting as well as continued uncertainty regarding the aggregate impact of pending mortgage-related rulemakings, the draft final rule does not include the proposed risk weights and instead incorporates the risk weights for residential mortgages under the general risk-based capital rules, which assign a risk weight of either 50 percent (for most first-lien exposures) or 100 percent for other residential mortgage exposures,” the Fed said. That means...