A former analyst at Moody’s Ratings has accused the credit rating agency of complicity in the financial meltdown in 2008, while a federal judge in Texas dismissed a government lawsuit against major banks involving non-agency MBS because it was filed too late. In his 2012 whistleblower lawsuit against Moody’s, Ilya Kolchinsky, a former analyst with the firm, alleged that the rating service issued inflated ratings, often “Aaa,” to most risky residential MBS and collateralized debt obligations it reviewed from 2004 to 2007. The lawsuit was brought...

Officials at the Securities and Exchange Commission see the final rule on disclosures recently issued by the federal regulator as bringing major changes to the non-agency mortgage-backed security market. However, whether issuers will offer non-agency MBS subject to the disclosure requirements is largely in the hands of investors that have been willing to buy securities not subject to the SEC’s standards. Beginning in 2017, issuers of publically registered non-agency MBS will have to disclose 270 data points, mostly at loan level. The disclosure requirements in the SEC’s Reg AB2 rule do not apply to 144A offerings, although some observers expect the SEC eventually to extend them to private placements.

Non-agency jumbo mortgage originations accounted for a historically high 19.4 percent of new lending during the first half of 2014, and the sector is steadily gaining ground, according to a new Inside Mortgage Finance analysis of big-ticket mortgage activity. During the second quarter of 2014, lenders originated an estimated $59.0 billion of mortgage loans that were too big to be financed through Fannie Mae, Freddie Mac or the FHA. That was up 34.1 percent from the first quarter, a noticeably bigger increase than the 25.5 percent jump in total mortgage originations for the period. Compared to last year, jumbo lending was...[Includes three data charts]

Issuers of non-agency MBS and commercial MBS, among other structured finance asset classes, are set to face increased costs to comply with a rule from the Securities and Exchange Commission that increases disclosure requirements. But deals that are not issued publicly would avoid the increased costs. Last week, the SEC unanimously adopted a wide-ranging final rule known as Reg AB2, which was first proposed in 2010. By the beginning of 2017, newly issued, publicly registered non-agency MBS will have to include 270 loan-level data points disclosed via the SEC’s Electronic Data Gathering, Analysis, and Retrieval system, known as EDGAR. The required disclosures include...

The legal settlement between Goldman Sachs and the Federal Housing Finance Agency over soured non-agency MBS sold to Fannie Mae and Freddie Mac featured an unusual buyback of the securities by the investment bank. It leaves just three big defendants left to settle or go to trial, legal observers note. Under the terms of the settlement announced Aug. 22, Goldman is required to pay $3.15 billion to repurchase securities that were the subject of the claims in the FHFA’s lawsuit. The economic value of the settlement is estimated...

A number of real estate investment trusts are increasing their presence in the jumbo mortgage-backed security market with conduit programs as well as purchases of subordinate tranches from new MBS. Two Harbors Investment said its jumbo conduit had a pipeline with an unpaid principal balance of $650 million at the end of the second quarter of 2014, more than four times the REIT’s pipeline at March 31. Two Harbors recently issued a $267.67 million jumbo MBS, the first from the REIT this year ...

The Securities and Exchange Commission this week unanimously approved a final rule covering registration and disclosures for asset-backed securities, including new non-agency mortgage-backed securities. The so-called “Reg AB2” measure requires significant changes for new non-agency MBS, including loan-level disclosures and a three-day waiting period before issuing new deals. “The SEC must protect investors in asset-backed securities just as it does investors in any other security ...

Bank of America last week agreed to a record settlement with the Department of Justice and others, largely involving non-agency mortgage-backed securities issued from 2003 through 2008. Officials at the DOJ said the settlement focused on disclosures provided by BofA and its affiliates, including Countrywide Financial, First Franklin and Merrill Lynch, to investors in the bonds. “It’s kind of like going to your neighborhood grocery store to buy milk advertised as fresh, only to discover that ...

The Securities and Exchange Commission this week approved a final rule with new requirements for rating services and due diligence providers. The rule was approved on a 3-2 vote, with the SEC’s two Republican-appointed commissioners chafing at standards required by the Dodd-Frank Act. Among other provisions, the SEC is requiring nationally recognized statistical rating organizations to strengthen their internal controls, establish new procedures designed to protect the integrity of rating methods ...

Goldman Sachs agreed to a settlement with the Federal Housing Finance Agency last week to resolve claims about non-agency mortgage-backed securities purchased by Fannie Mae and Freddie Mac before the financial crisis. The FHFA said the settlement will cost Goldman $1.20 billion and the firm will buyback non-agency MBS from the government-sponsored enterprises. The original balance of the securities owned by Fannie and Freddie that Goldman will buyback is ... [Includes five briefs]