The non-agency jumbo mortgage-backed security market expanded significantly in the first quarter of 2013, with more new issuance than was produced in all of last year, according to the Inside Mortgage Finance MBS Database. Issuance showed no signs of slowing down entering the second quarter, led by Redwood Trust. Some $3.95 billion in non-agency jumbo MBS was issued in the first quarter, compared with $3.46 billion in issuance in all of last year. The last time non-agency ... [Includes one data chart]

Moody’s Investors Service said it would not have given its highest rating to the jumbo mortgage-backed security issued last week by JPMorgan Chase because of concerns about the deal’s representation and warranty framework and the lack of risk retention by Chase. DBRS, Fitch Ratings and Kroll Bond Rating Agency gave JPMorgan Mortgage Trust 2013-1 AAA ratings with credit enhancement of 7.40 percent on the top-rated tranche. The rating services said the credit enhancement on the deal was ...

With banks starting to issue jumbo mortgage-backed securities instead of holding originations in portfolio, the sector has expanded beyond the two nonbanks that propped up non-agency jumbo MBS issuance since 2010. The activity shows favorable economics for non-agency MBS, including tighter spreads on interest rates between conforming mortgages and non-agency jumbos. The average interest rate on a 30-year fixed-rate conforming mortgage was 3.596 percent this week, according to Inside Mortgage Finance ...

Springleaf Financial is set to issue another subprime mortgage-backed security backed by vintage originations. The fifth deal from Springleaf since 2011 shows continued demand from investors for non-agency MBS. Springleaf’s $835.11 million MBS will receive a AAA rating with loss coverage of 55.5 percent on the top-rated tranche, according to a presale report released this week by Standard & Poor’s. The average seasoning of the loans is seven years. As with previous Springleaf deals, all of ...

Bank of America agreed to a $165.0 million settlement with the National Credit Union Administration this week regarding non-agency mortgage-backed securities purchased by credit unions that subsequently failed. BofA did not admit fault as part of the settlement. The NCUA has received more than $335.0 million in non-agency MBS settlements with five firms and has similar lawsuits pending against nine other firms. The Conference of State Bank Supervisors ... [Includes three briefs]

Production of new non-agency MBS and non-mortgage ABS increased sharply in the first quarter of 2013, offsetting a slight decline in the agency MBS market. Total MBS and ABS issuance rose 2.9 percent from the fourth quarter of 2012 to $515.3 billion during the first three months of 2013, according to a new Inside MBS & ABS analysis and ranking. The first quarter of this year was up 19.7 percent from the same period in 2012, and it marked the strongest quarterly issuance since the third quarter of 2009. For a change, the increase did not come...[Includes two data charts]

Moody’s Investors Service issued a “special comment” this week to warn that the new non-agency jumbo MBS issued by JPMorgan Chase would not have received a AAA rating from Moody’s, had the firm been asked to rate the deal. The rating service raised concerns about representations and warranties and a lack of risk retention on the deal.

The U.S. Supreme Court has denied a petition to review a federal appeals court decision to reinstate a securities class action lawsuit filed by MBS investors against Goldman Sachs. In denying the petition, the SCOTUS let stand a ruling by the U.S. Court of Appeals for the Second Circuit to overturn a lower court’s decision to dismiss the plaintiff’s suit for lack of standing and for failure to show injury.

The majority of financial institutions defending themselves against a massive litigation initiative by the Federal Housing Finance Agency on behalf of Fannie Mae and Freddie Mac for toxic mortgage-backed securities purchased by the GSEs launched a counteroffensive this week by urging a federal appeals court to intervene in their favor against the “unfair” trial judge. Fifteen banks, including JPMorgan Chase, UBS Americas, Citigroup, Deutsche Bank and Bank of America, filed a joint petition with the Second Circuit Court of Appeals in New York complaining that U.S. District Judge Denise Cote has engaged in a “one-sided” approach designed to force a settlement rather than “foster fair and reasonable determination of the issues.”

Two banks re-entered the non-agency mortgage-backed security market in late March after years of holding such originations in portfolio. JPMorgan Chase issued a $616.26 million non-agency jumbo MBS and EverBank Financial is set to issue a $307.36 million non-agency jumbo security. The banks join Redwood Trust, which was the only non-agency jumbo MBS issuer in 2010 and 2011, and Credit Suisse, which resumed non-agency jumbo MBS issuance in 2012. The banks issued non-agency jumbo MBS even though they ...