Two more funds started to exit the Public-Private Investment Program in the third quarter of 2012. Returns from the program – which largely focuses on investing in vintage non-agency mortgage-backed securities – remain strong and the Public-Private Investment Funds can manage their holdings for at least the next five years, but four of the original nine PPIFs have now exited the PPIP. In July, RLJ Western terminated its PPIF’s investment period four months ahead of schedule. The notification occurred shortly after ...

Prices on vintage non-agency mortgage-backed securities have increased significantly in the past three months and are expected to remain elevated. The strong returns are being driven by improvements in home prices and loan performance along with decreased supply. “The numerous positive developments in the non-agency space should continue to benefit the non-agency market in the fourth quarter,” said analysts at Bank of America Merrill Lynch. “We see the sector as fundamentally undervalued at current levels.” ...

Attendees at the ABS East conference sponsored by Information Management Network this week in Miami were more optimistic about the MBS and ABS markets than they have been in some time. So optimistic, in fact, that some industry participants are already concerned about bubbles forming in the still recovering securities markets. “If this conference is any indicator, it looks like everybody feels there’s real vitality,” said Lewis Ranieri, chairman and founding partner of Ranieri Partners. “I haven’t seen a conference like this in quite a while.” Close to 3,000 people attended the event. Jay Steiner, a managing director at Deutsche Bank, noted...

Rep. David Schweikert, R-AZ, said this week that in the coming months he will introduce bipartisan legislation to establish a regulatory framework for prime non-agency MBS. “I’ve spent the last two years trying to figure out what the box will look like,” he said. Non-agency MBS participants continue to debate whether reform of the government-sponsored enterprises is necessary before the non-agency MBS market can return in a meaningful manner. At the ABS East conference sponsored by Information Management Network this week in Miami, Schweikert said a functioning non-agency MBS market is necessary before members of Congress can be convinced to move forward with GSE reform. “I need to have...

New issuance of non-agency MBS fell to an all-time low of $1.77 billion in the third quarter of 2012 as re-securitization activity nearly fell off the cliff, a new Inside MBS & ABS analysis reveals. The previous record low for non-agency MBS was $1.79 billion, set in the fourth quarter of last year. Issuance dropped 49.0 percent from the second to the third quarter, bringing year-to-date production to just $10.28 billion – off 60.1 percent from the first nine months of 2011. When it’s over, 2012 will likely represent...[Incluldes three data charts]

Springleaf Financial Services is ramping up to issue its third non-agency MBS this year, a nearly $900 million transaction backed primarily by vintage performing subprime loans. Springleaf Mortgage Loan Trust 2012-3 features a hefty 47.75 percent credit enhancement supporting its one AAA-rated tranche, according to a presale report from Standard & Poor’s. “Total credit enhancement comprises subordination, an interest shortfall reserve fund, excess interest, and overcollateralization,” noted the report. S&P said...

Supporters of a controversial plan to use eminent domain to seize underwater mortgages from non-agency MBS pools, write down their balances, refinance them into the FHA program and repackage them for sale to other investors are facing fresh challenges. In California, where the eminent domain plan was first introduced, the Joint Powers Authority formed by the County of San Bernardino and two of its cities, Ontario and Fontana, announced that its next meeting, which was scheduled for Thursday, Oct. 25, 2012, had been cancelled. The only business before the JPA is...

Redwood Trust issued a $320.34 million non-agency jumbo MBS this week, its fifth of the year. The security looks a lot like other recent MBS from Redwood and officials at the real estate investment trust are optimistic about future non-agency MBS issuance. Sequoia Mortgage Trust 2012-5 received AAA ratings with credit enhancement of 7.30 percent on the highest rated tranche. Fitch Ratings, Kroll Bond Rating Agency and Moody’s Investors Service all placed ratings on Redwood’s latest MBS issuance. The main concerns from the rating services regarding Redwood’s latest MBS have been raised...

Shellpoint Partners is preparing to issue new non-agency MBS as it filed a shelf registration statement this week with the Securities and Exchange Commission. Once approved, Shellpoint plans to issue non-agency MBS via Shellpoint Mortgage Acceptance, which it has nicknamed “Shelly Mac.” Non-agency MBS from the specialty finance company formed in 2010 with Lewis Ranieri as its chairman will differ in a number of ways from non-agency MBS issued by Redwood Trust. Instead of acquiring loans on a bulk or flow basis from lenders, Shellpoint said it only expects to securitize mortgages originated by its wholly-owned subsidiary New Penn Financial. “Shellpoint and New Penn Financial are...

Optimism in the non-agency MBS market’s recent extraordinary performance continues as investors look beyond legacy MBS to new transactions, such as Redwood Trust’s Sequoia jumbo securitizations, according to analysts. A recent analysis by Bank of America Merrill Lynch expects lower-yielding asset classes to push investors toward the non-agency MBS sector, where volumes are expected to remain at healthy levels for the rest of 2012. Analysts, however, noted...