Standard & Poor’s announced late last week that it updated the criteria for ratings on non-agency MBS with mortgage collateral originated before 2009. The new standards are effective immediately and will result in significantly more downgrades than upgrades, according to S&P analysts. The standards update criteria for credit, cash flows and rating stability, and introduce new methods for analyzing transactions that have fewer than 100 loans remaining in the pool. Vandana Sharma, a managing director and lead analytic manager for U.S. residential MBS ratings at S&P, said the new standards reflect key market trends. “In light of the stabilization of home prices and delinquencies in the U.S. mortgage market, these criteria seek...

Chimera Investment announced last week that it needs to restate quarterly earnings and other reports beginning with the third quarter of 2008 due to accounting on its portfolio of non-agency mortgage-backed securities. The real estate investment trust has been grappling with the issue for a year and has not issued earnings since the third quarter of 2011. While still completing an evaluation of the restatement, Chimera said the change will result in lower income along with a more than doubling of ...

Home Affordable Modification Program servicers are increasingly offering principal reduction loan modifications to non-agency borrowers, according to the Treasury Department. The increase comes after the Treasury tripled the incentives that can be paid to investors beginning in March, though principal reduction mods have yet to increase significantly due to the change. In recent months, about 70.0 percent of eligible non-agency HAMP borrowers received some form of principal reduction ... [Includes one chart]

It has been another busy week in the turbulent world of litigation over non-agency mortgage-backed securities. The Federal Deposit Insurance Corp. filed lawsuits regarding non-agency MBS, Wells Fargo agreed to settle non-agency MBS-related charges with the Securities and Exchange Commission and the Department of Justice and the SEC dropped its non-agency investigation into actions by Goldman Sachs. The FDIC lawsuits against 15 issuers and underwriters relate to $1.46 billion in AAA tranches of non-agency MBS ...

Standard & Poor’s last week updated its criteria for ratings on non-agency mortgage-backed securities with collateral originated before 2009. The standards update criteria for credit, cash flows and rating stability and apply immediately. The rating service said the changes will result in more downgrades than upgrades. This week, S&P placed 16,872 ratings from 3,364 securities with a par amount of $253.95 billion on CreditWatch. About 70.0 percent of the ratings are on watch for potential downgrades ... [Includes three briefs]

The Federal Housing Finance Agency this week joined a growing chorus raising warnings about proposals to use the eminent domain powers of local government to seize performing underwater mortgages out of non-agency MBS pools. In an unusual move, the agency said it has “significant concerns about the use of eminent domain to revise existing financial contracts and the alteration” of Fannie Mae, Freddie Mac and Federal Home Loan Bank securities holdings. The FHFA formally invited public comment on the concept and warned that “action may be necessary on its part [as conservator and regulator of the government-sponsored enterprises] to avoid a risk to safe and sound operations and to avoid taxpayer expense.” The issue drew attention this week because both Fannie and Freddie managed...[Includes one data chart]

A German-based, state-owned lender has filed suit in a Manhattan court against Great Britain’s second-largest bank, alleging it sold over $274 million of non-agency MBS under false pretenses.Bayerische Landesbank contends in its lawsuit filed Aug. 3 in New York State Supreme Court that Barclays PLC issued offering materials that contained “material misrepresentations and omissions” regarding the underwriting standards used while issuing the residential MBS.Barclays’ offering materials also allegedly misrepresented...

Sales and purchases of vintage non-agency MBS have been well above average levels in recent weeks as investors see value in the sector with the housing market recovering. The purchases are being made by traditional buyers such as money managers and insurance companies as well as by banks, according to industry analysts. Daily trading volume of non-agency MBS has averaged about $3.0 billion in recent weeks, based on an analysis of TRACE data by Barclays Capital. During the past six to 12 months, daily non-agency MBS trading averaged $1.7 billion to $2.0 billion. Some $1.09 trillion in non-agency MBS was...

Springleaf Financial Services is gearing up to issue its second non-agency MBS of the year, a $970.0 million deal backed by seasoned subprime mortgages. The company, formerly known as American General Finance, stopped new residential mortgage originations in January of this year. Now owned by Fortress Investment, Springleaf issued a $473.1 million MBS backed by seasoned subprime loans in early April. At the end of the first quarter, the company said it had $9.7 billion of real-estate finance receivables on its books, most of which were classified as nonprime or subprime. Springleaf Mortgage Loan Trust 2012-2 features...

Bank of America appears to be moving slower than some industry analysts had expected in fulfilling some of its obligations under the proposed $8.5 billion settlement over Countrywide MBS reached last year with Bank of New York Mellon as trustee for a group of institutional investors. Although the settlement is far from finalized, BofA said it would move distressed loans to subservicers regardless of the outcome. The bank has moved approximately 38,000 mortgages to Specialized Loan Servicing, Select Portfolio Servicing and Green Tree, as of June 26, 2012, according to analysts at Barclays. Of this amount, 73 percent were shipped to SLS, SPS got 21 percent, and Green Tree received 6 percent. “Of the 38,000 loans, mortgage servicing rights have been transferred...