U.S Bank may proceed on a limited basis in its legal claim against Bank of America and Countrywide Financial in connection with a soured $1.75 billion MBS deal after a New York state judge ruled last week to narrow the case to just a fraction of the loans in dispute. Judge Eileen Bransten dismissed a breach of contract claim against BofA that sought to force the bank to repurchase some 4,400 loans in the pool due to “pervasive breaches” in the representations and warranties of the securities. U.S. Bank, in its capacity as trustee for HarborView Mortgage Loan Trust, sued BofA and Countrywide in August 2011 seeking repurchase of non-performing loans from the underlying residential MBS. The judge said...

Reports of short sales being the new “order of the day” for servicers appear to be overblown. The proclamations were prompted by a report last week from Fitch Ratings. Banks have indeed increased their use of short sales in lieu of loan modifications when completing loss mitigation on non-agency mortgages. Meanwhile, special servicers largely avoid short sales and short sales on agency mortgages are declining. Short sales performed by the bank servicers on mortgages in non-agency mortgage-backed ...

Fannie Mae and Freddie Mac mortgage-backed securities remained the preferred investment choice of the 12 Federal Home Loan Banks during the first quarter of 2013, with a negligible decrease from the previous quarter, while a number of FHLBanks indicated no plans to sell the riskier non-agency MBS in their portfolios. A new analysis and ranking by Inside The GSEs based on data from the Federal Housing Finance Agency found overall MBS investments for the dozen FHLBanks declined 1.0 percent to $137.14 billion between the fourth and first quarters. However, non-agency MBS, which made up 18 percent of the total FHLBank system’s share of MBS during the first three months of this year, fell to $24.69 billion as of March 31, 2013. This was down 2.9 percent from the fourth quarter of 2012 and down 13.5 percent from $28.52 billion from the same period a year ago.

The Federal Housing Finance Agency has settled its second mortgage-backed securities lawsuit in its massive litigation effort against non-agency MBS issuers and underwriters that sold to Fannie Mae and Freddie Mac. Citigroup last week agreed to pay damages to settle allegations that the investment bank sold $3.5 billion of faulty MBS to the two GSEs in the years leading up to the financial crisis. The FHFA filed suit during the summer of 2011 against 18 financial institutions, including Citi, alleging violations of the federal Securities Act of 1933.

Banks large and small are increasing their originations of non-agency jumbo mortgages, according to an analysis by Inside Mortgage Finance. Demand for the mortgages in the secondary market has increased significantly recently, giving banks another option besides holding the loans in portfolio. An estimated $54.0 billion in non-agency jumbos were originated in the first quarter of 2013, up 14.9 percent from the first quarter of 2012. Fourteen of the top 20 non-agency jumbo lenders increased their originations during that period, including Bank of America and Chase, which each increased their jumbo originations by about 66 percent. Agency jumbo production – Fannie Mae, Freddie Mac and FHA business over the traditional $417,000 conforming loan limit – was...[Includes three data charts]

EverBank Financial is preparing to issue a $303.30 million non-agency jumbo mortgage-backed security, according to a presale report issued by DBRS this week. The MBS has similar characteristics to the $307 million jumbo security EverBank issued in March. DBRS cited strong reps and warrants on the deal, including automatic reviews for seriously delinquent loans, mandatory arbitration and no sunset provisions. However, the rating service said EverBank’s limited securitization history and ...

Non-agency MBS execution for certain high-quality mortgages is competitive with agency MBS execution, according to industry analysts. A slight increase in the guaranty fees charged by the government-sponsored enterprises would make non-agency securitization even more attractive, though the incentive for banks to hold non-agency originations in portfolio remains strong. Non-agency MBS execution is currently competitive with agency MBS execution for purchase mortgages with loan-to-value ratios below 70 percent and credit scores above 740, according to analysts at Barclays Capital. “For the cleanest collateral, non-agency execution could be...

Home prices are improving at a rapid pace throughout the nation, sparking bidding wars in certain markets, according to several different indices. But this rise in “home equity” is also spurring talk that the two largest players in residential finance – Fannie Mae and Freddie Mac – could be sitting on large unrealized gains in both their MBS and whole loan portfolios. One veteran MBS investor told Inside MBS & ABS that home values have improved so much over the past 120 days that the government-sponsored enterprises may be looking at “monster” increases in the value of their holdings. “Keep in mind that these two are sitting on loans where a year ago the loan-to-value ratio was 115 percent,” said this investor. “But most of this stuff isn’t underwater anymore. If [the GSEs] re-calculate their reserves, they will see some huge gains.” In its 10-Q filing for the first quarter, Fannie reported...

Ally Financial, the former parent of bankrupt Residential Capital, announced last week it will pay $2.10 billion to settle legal claims with ResCap and its creditors as part of ResCap’s comprehensive settlement agreement and Chapter 11 plan. Under the settlement, Ally will contribute $1.95 billion in cash to the ResCap bankruptcy estate, plus $150 million in insurance proceeds. The agreement also requires that Ally receive full repayment on its secured claims, including $1.13 billion that is owed under existing credit facilities. Announced earlier this month, the agreement gets...

The amount of non-agency MBS held by the 12 Federal Home Loan Banks continued its steady decline during the first quarter of 2013. Non-agency MBS investments by the FHLBanks came to $24.69 billion as of March 31, 2013, down 2.9 percent from the fourth quarter of 2012 and off 13.5 percent from $28.52 billion in the same period a year ago. Non-agency MBS made up...[Includes one data chart]