New non-agency MBS issued in 2017 will likely include more diversified collateral and feature some structural changes, analysts at Moody’s Investors Service said in a new report this week. The rating service projected that non-agency prime jumbo volume will remain steady in 2017, while issuers will continue to explore non-traditional asset types, such as re-performing and non-performing loans, reverse mortgages, non-qualified mortgages and nonprime transactions. “Although prime jumbo deals will start to include loans with slightly lower FICOs and higher loan-to-value ratios than those loans included in 2016 transactions, collateral quality will remain...

Standards proposed by the Structured Finance Industry Group for disclosures of representations and warranties on new non-agency mortgage-backed securities are likely to put a burden on conduits and other aggregators that pool mortgages from scores of originators. The Wall Street group recently released the fourth edition of its RMBS 3.0 “green papers,” which aim to revive issuance of non-agency MBS by making reforms that will attract investors. The latest green paper focused on ...

Moody’s Investors Service published a warning this week regarding mortgage programs that use bank statements and letters from accountants to verify borrowers’ income. The rating service said that type of underwriting – especially when relying on fewer than 24 months of statements – yields loans that are more risky than mortgages that have traditional income verification. Bank-statement mortgages have gained some prominence in the non-agency market this year as Lone Star Funds ...

American International Group is preparing to resume issuing non-agency mortgage-backed securities, according to officials at the insurance company. The planned issuance differs significantly from the subprime MBS AIG issued before the financial crisis. Douglas Dachille, an executive vice president and CIO, said the firm is working to “rebalance its exposure to residential mortgages” after AIG’s sale of United Guaranty, a private mortgage insurer. During a recent presentation to investors ...

Lone Star Funds is set to issue a mortgage-backed security backed by new nonprime mortgages, according to documents filed with the Securities and Exchange Commission this week. It will be the third MBS from the COLT shelf this year. AMC Diligence said it reviewed 486 mortgages with a total unpaid principal balance of $235.40 million for the planned MBS. The mortgages were originated by Caliber Home Loans, LendSure Mortgage and Sterling Bank & Trust ... [Includes two briefs]

The latest “Green Paper” from the Structured Finance Industry Group proposes that issuers of non-agency MBS improve transparency by comparing the representations and warranties on a new issuance with a set of benchmark reps and warrants. “A substantial population of investors have very clearly stated their collective belief that the current representation-and-warranty process is neither practically useful for its intended purpose, nor scalable,” according to the fourth SFIG Green Paper aimed at reviving the non-agency MBS market. Currently, non-agency MBS issuers provide...

An affiliate of Bayview Asset Management is preparing to issue a non-agency MBS backed by nearly 5,000 vintage “daily simple-interest” mortgages, according to presale reports by DBRS and Fitch Ratings. If the deal is positively accepted by investors, there’s the potential for more issuance as Bayview is servicing a somewhat large portfolio of the loans. The planned $241.2 million Bayview Opportunity Master Fund Trust 2016-SPL1 is stocked with mortgages originated about 10 years ago. The loans – most of which have fixed interest rates – have a weighted-average interest rate of 8.926 percent. The so-called DSI mortgages differ from a standard mortgage in the calculation of interest owed by the borrower. With a standard mortgage, interest owed is calculated...

Commercial banks and savings institutions boosted their holdings of residential MBS substantially during the third quarter, a new analysis of call-report data by Inside MBS & ABS reveals. Banks and thrifts held a record $1.732 trillion of residential MBS in their available-for-sale and held-to-maturity accounts at the end of September, a 2.9 percent increase from June, not including $46.3 billion in trading accounts. The emphasis was heavily on agency pass-through securities, with holdings of Fannie Mae and Freddie Mac MBS surging 6.6 percent higher. Ginnie Mae saw...[Includes two data tables]

Freddie Mac is set to issue a $459.92 million Whole Loan Securities transaction, according to a presale report from Moody’s Investors Service. The firm didn’t rate the senior tranche of the deal but did place a Baa1 rating on a mezzanine tranche of Freddie Mac Whole Loan Securities 2016-SC02. The government-sponsored enterprise priced the latest WLS transaction this week, with the deal expected to close next week. “We are pleased with the pricing levels and depth of investor participation in the WLS program,” said Kevin Palmer, senior vice president of credit risk transfer at Freddie. “We look forward to continued issuance in 2017.” Freddie has issued...

The market for jumbo mortgage-backed securities looks to be regaining some momentum as Shellpoint Partners plans to resume issuance and market-leader JPMorgan Chase prepares another deal. Shellpoint’s New Penn Financial is set to issue a $353.68 million jumbo MBS next week, according to presale reports by Kroll Bond Rating Agency and Moody’s Investors Service. Shellpoint Co-Originator Trust 2016-1 will mark the first issuance from the MBS shelf since ...