Even though approximately $10.0 billion in non-agency representation and warranty payouts have already been included in proposed or completed settlements, another $34.0 billion in payouts are probably waiting in the wings, with Bank of America and JPMorgan facing the largest exposure by far, according to analysts at Barclays Capital. “Total payouts to non-agency investors from rep and warranty related recoveries will be $26.0 billion to $52.0 billion, using the $8.5 billion Countrywide settlement deal as a template. This corresponds to an average of 3-6 points of recoveries on non-agency securities...

The non-agency MBS market showed some spark as always-performing loans continued to improve in February and more nonperforming loans moved to the re-performing bucket, according to Amherst Securities Group’s latest analysis of the mortgage market. In its February report, Amherst said first-time defaults from the always-performing bucket dropped to 0.75 percent during the month from 0.82 percent in January. In dollar terms, new defaults constituted $4.0 billion, down from $4.4 billion the previous month, the firm reported. On a year-over-year basis, always-performing loans were down to $525.6 billion from...

The documents governing a proposed $25.0 billion settlement involving five major banks include greater incentives for principal reduction loan modifications on portfolio loans rather than loans in non-agency mortgage-backed securities. However, non-agency MBS investors remain concerned that they could take losses due to the settlement. The consent judgments against Ally Financial, Bank of America, Citigroup, JPMorgan Chase and Wells Fargo were filed in federal court this week, a month after the settlement was announced by 49 state attorneys general and the federal government ...

Beginning June 1, the non-agency portion of the Home Affordable Modification Program will include a “Tier 2” with expanded eligibility requirements and adjusted incentives. The Treasury Department released the details last week, officially making changes first announced in January. The changes to HAMP include eligibility for certain rental properties, less stringent debt-to-income ratio requirements, a loosening of the short sale and deed-in-lieu of foreclosure requirements and an extension of all HAMP programs through the end of 2013. HAMP was initially scheduled to expire at the end of this year ...

Nationstar Mortgage announced last week that it plans to acquire the $63.0 billion mortgage portfolio and certain other assets from Aurora Bank, a subsidiary of Lehman Brothers. The acquisition includes co-investment by a real estate investment trust affiliated with the owner of Nationstar and continues Nationstar’s rapid nonprime servicing growth. The high-touch servicer said it expects the long-pending sale by the bankrupt Lehman to close during the second quarter of 2012. A number of other servicers had expressed interest in bidding on the Aurora portfolio, including Ocwen Financial ...

Wells Fargo & Co. is looking to hire an independent third-party expert to continue an investigation started by the bank in its capacity as corporate trustee of mortgage trusts that could compel lenders to repurchase soured mortgage loans contained in a 2007 non-agency MBS. According to reports, Wells Fargo wants to hire Law Debenture Trust Co. of New York to look into alleged defects in loans contained in Bear Stearns Mortgage Funding Trust 2007-AR2 and to force JPMorgan Chase and its servicer subsidiary to repurchase the bad loans. Requests for comment to both Wells Fargo and Law Debenture had not...

Tough underwriting criteria, negative equity and tremendous regulatory uncertainty remain major hurdles to non-agency mortgage securitization, but people are at least thinking about new deals. Securitization players are still moving forward on a very cautious basis, according to Melanie Gnazzo, a partner in the structured finance and tax practice groups in the San Francisco office of law firm Chapman and Cutler. “We regularly look at term sheets for products that would provide financing for restructured mortgages and there are more inquiries focused on dusting off old shelf filings...

Originations of non-agency jumbo mortgages increased 32.1 percent in the fourth quarter, aided by a modest reduction in Fannie Mae and Freddie Mac loan limits in high-cost markets and a surge in refinance lending. An estimated $37.0 billion in jumbos were originated in the fourth quarter, lifting annual production to $118.0 billion in 2011, a 13.5 percent increase from the previous year. It was the jumbo market’s best year since 2007 for origination volume, and jumbos accounted for 8.7 percent of total mortgage lending ... [Includes one data chart]

Bank of America won a favorable ruling this week on its proposed $8.5 billion settlement with a group of non-agency mortgage-backed securities investors. With the settlement likely to be decided in state court, analysts suggest that the deal will serve as a model for other non-agency MBS disputes. Baupost Group, a distressed debt fund that has challenged the settlement under the name “Walnut Place,” succeeded in October in having the settlement moved to federal court. However, the Second Circuit Court of Appeals determined this week that the settlement should be overseen by the Manhattan State Supreme Court ...

With the economics of non-agency securitization uncertain, Redwood Trust announced this week that it is considering bulk sales of newly originated non-agency jumbo loans in lieu of securitization. The real estate investment trust said it plans to issue four to six mortgage-backed securities this year – including the one completed in January – depending on whether the REIT sells a portion of its whole loans on a bulk basis. The business decision to either securitize or sell whole loans will be based on balancing ...