More investors would be willing to buy new non-agency mortgage-backed securities if loans in the deals had prepayment penalties, according to an industry analyst. The penalties offer investors protection, but their use has been limited by the Consumer Financial Protection Bureau’s ability-to-repay rule, among other factors. Lawrence White, a professor and deputy chair in economics at the New York University Stern School of Business, suggested that the non-agency MBS market would see increased demand from investors, particularly insurance companies, if loans in non-agency MBS included prepayment penalties. “These institutions have largely stayed...

Standards for qualified-residential mortgages along with risk-retention requirements for certain non-agency mortgage-backed securities take effect Dec. 24, 2015. The final rule establishing the implementation date was published in the Federal Register at the end of December 2014. Federal regulators first detailed...[Includes two briefs]

The outstanding supply of agency single-family MBS continued to grow at a subdued pace during the third quarter of 2014, and the biggest investor classes did most of the heavy lifting funding the market, according to a new Inside MBS & ABS analysis. On the supply side, there were $5.632 trillion of single-family MBS guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae outstanding at the end of September. That was up just 0.4 percent from the previous quarter but had enough growth rings to show a 1.2 percent gain from a year ago. As has been the case for the past few years, the Ginnie MBS market grew...[Includes two data chart]

The number of issuers offering jumbo mortgage-backed securities will increase in 2015, according to analysts at various rating services, but total issuance volume isn’t expected to grow by much compared with this year. Attracting investors willing to purchase AAA tranches of jumbo MBS remains a key obstacle. Some $5.4 billion in jumbo MBS were issued during the first three quarters in 2014, according to Inside Nonconforming Markets, including $3.1 billion in the third quarter ...

A savings bank that focuses on subservicing has been the most active servicer of loans in jumbo mortgage-backed securities since 2013, according to Fitch Ratings. A number of rating services view the firm, Cenlar, as a strong servicer with good prospects for continued growth. Last week Fitch affirmed its RPS2 rating for Cenlar as a servicer of prime mortgages that demonstrates “high performance in overall servicing ability.” Fitch said that since 2013, Cenlar has added ...

Credit Suisse appears to be close to issuing a jumbo mortgage-backed security with some loans sourced from Five Oaks Investment. Stonegate Mortgage announced an expansion of its offerings of non-agency mortgage products last week. The lender is offering adjustable-rate mortgages with loan-to-value ratios as high as 90 percent and no requirement for mortgage insurance. The loans can have balances as high as the conforming loan limit ... [Includes three briefs]

Ginnie Mae approved the transfer of $66.06 billion in mortgage servicing rights during fiscal year 2014, a 56.5 percent tumble from the prior year as “mega” MSR transactions hit the skids. In fiscal 2012, just $25.39 billion in Ginnie product changed hands, but the market heated up significantly with $152.22 billion transferred in 2013. As always, transfers can be...[Includes one data chart]

The Financial Industry Regulatory Authority will soon propose increasing transparency on trading of certain MBS, but officials say it won’t the market. Late last week, the FINRA board of governors authorized issuance of a regulatory notice soliciting comment on a proposal to amend rules for Trade Reporting and Compliance Engine, or TRACE. The proposal would provide for public dissemination of transaction information in real time for deals valued under $1 million, and in aggregate weekly and monthly reports for transactions valued at $1 million or more. FINRA Chairman and CEO Rick Ketchum said...

The City of San Francisco has delayed a proposed partnership with Richmond, CA, to use eminent-domain authority to forcibly acquire distressed mortgages out of non-agency securitization trusts, opting instead to study the impact of such an agreement as well as other alternatives to assist underwater homeowners. Opposition by the San Francisco City Controller and the mortgage banking industry has forced John Avalos, a member of the city’s Board of Supervisors, to scale back his partnership proposal. Avalos laid out...

Supporters of the non-agency residential MBS market will have plenty of heavy lifting to do next year, as they face an anticipated increase in volatility for some deals and a continued dominating presence in the broader market by Fannie Mae and Freddie Mac, among a host of challenges. But at least there’s some degree of regulatory certainty for the market now, and it’s likely that opportunities will emerge for savvy investors to snap up some extra yield, according to a consensus of Wall Street analysts who cover the space. Analysts at Fitch Ratings expect to see the continuation of a slow recovery for the non-agency MBS space in 2015. “The recovery in primary U.S. RMBS issuance remains anemic as the industry continues to face challenges including continued government-sponsored enterprise dominance, more attractive financing alternatives such as whole-loan sales, new mortgage regulation, and a weak AAA investor base,” Fitch analysts said in a 2015 outlook piece. Also, despite the industry’s renewed efforts led by the Structured Finance Industry Group to resolve the absence of necessary structural reforms after the financial crisis, progress is...