Credit Suisse has adjusted the representations and warranties included in each of its recent non-agency MBS deals, reacting to criticism from investors that the reps and warrants do not meet models set by the American Securitization Forum. While the new jumbo MBS issued by Credit Suisse last week made some improvements on reps and warrants compared with its previous deals, the issuer continues to experiment with somewhat looser standards. “Credit Suisse has introduced several new elements to the rep and warrant structure in recent securitizations which has caused some diverging opinions in the securitization community,” according to analysts at Bank of America Merrill Lynch. “While the ASF has provided a starting point with their model reps, it will likely take the market some time to find the right balance between investors and originators.” Issuance from Redwood Trust has been seen...

MBS investors can expect fewer scratches and dents in non-agency MBS portfolios, according to a new analysis from Moody’s Investors Service that says houses are less likely to lose value in a recovering market and modified loan recoveries are increasing as borrowers make more payments before re-defaulting. Part of the story is that the market is seeing higher recoveries for defaulted modified mortgages than for unmodified defaulted loans. “Even though modifications on loans that were eventually liquidated in 2010 and 2011 exposed the properties to further price depreciation by delaying their liquidation, those modified loans on average still realized higher recoveries than did defaulted unmodified loans,” analysts at Moody’s said. “This is because loan modifications, even failed ones, usually enable...

Officials at Redwood Trust took pains last week to defend differences in the real estate investment trust’s business model compared with other REITs that focus on investing in mortgage-backed securities. Some investors have been critical of low dividend payments from Redwood, but the REIT said its dividend payments are not directly comparable to other REITs. “Analysts and investors puzzle about how to categorize Redwood and how to value our company,” Martin Hughes and Brett Nicholas ...

Credit Suisse this week obtained ratings on its first non-agency jumbo MBS of 2013 in a deal that includes sunsets for certain representation and warranties as well as a contribution from Two Harbors Investment, which has been working for years to issue non-agency MBS on its own. The $425.67 million CSMC Trust 2013-TH1 received AAA ratings from Fitch, DBRS and Standard & Poor’s. The top-rated tranche had a credit enhancement of 7.05 percent, well above the 5.85 percent level on Credit Suisse’s previous deals but in line with recent Redwood transactions. DBRS said...

MBS guaranty fees charged by Fannie Mae and Freddie Mac would not have to increase by much from current levels to shift risk to the private sector, according to a new analysis by Andrew Davidson & Co. However, if policymakers looking to reduce the market share of the government-sponsored enterprises want to expand credit availability beyond the tight standards in the GSE market, g-fees will have to increase significantly. Fannie Mae reported that the average effective g-fee in its third quarter 2012 business was 41.8 basis points, and the GSEs raised their fees by 10 bps during the fourth quarter of last year. A report this week from the Bipartisan Policy Center Housing Commission proposed...

Commercial banks and savings institutions reported a modest decline in their aggregate investment in residential MBS during the fourth quarter of 2012, according to a new Inside MBS & ABS analysis of call report data. Banks and thrifts held $1.579 trillion of residential MBS at the end of last year, down 2.4 percent from the close of the third quarter. It was the industry’s lowest aggregate position since the end of 2011, but banks still held an historically high 25.0 percent of total MBS outstanding. Compared to the end of 2011, bank MBS holdings were...[Includes two data charts]

Potential issuers of new non-agency MBS are looking to establish representations and warranties that provide less protection for MBS investors, according to Fitch Ratings. The rating service said it will take a negative view on deals with reps and warrants that vary from the rating service’s standards, which largely mirror guidelines established by the American Securitization Forum. In a report released this week, Fitch said firms looking to issue non-agency MBS have been shopping deals with reps and warrants weaker than the new framework established by the Federal Housing Finance Authority for repurchase requests from the government-sponsored enterprises. The FHFA’s framework, which went into effect in January, includes a sunset for underwriting reps and most fraud reps if a borrower makes 36 consecutive timely payments, which Fitch said would not necessarily unduly expose MBS investors to greater losses. Rui Pereira, a managing director and head of U.S. residential MBS ratings at Fitch, said...

Redwood Trust plans to more than triple the dollar amount of non-agency jumbo mortgage-backed securities it issues this year compared with its issuance from 2012, according to comments this week from officials at the real estate investment trust. Redwood also plans to securitize conforming jumbos and even aggregate conforming loans to sell to Fannie Mae and Freddie Mac. The REIT’s goal for 2013 is to issue about $7.0 billion in non-agency MBS. While potential competitors struggled to ...

JPMorgan Chase is close to selling a non-agency jumbo mortgage-backed security, according to traders and jumbo executives familiar with the company’s activities. Chase is treating the MBS as a test deal – which has been delayed – though it could close by the end of this month. A spokesman for Chase declined to comment on the matter but a source at the company confirmed that a deal is in the works. Chase might issue the deal as a private placement or the company might keep the security for its own portfolio and ...

Firms are looking to issue new non-agency mortgage-backed securities with looser representation and warranty standards than most post-crisis issuance, according to Fitch Ratings. The rating service issued a report this week critical of looser reps and warrants and pointed to Redwood Trust as an issuer with high standards for reps and warrants. “We believe that transactions with these more aggressive rep and warranty provisions have the potential to weaken a transaction and effectively reduce ...