Melvin Watt, director of the Federal Housing Finance Agency, revealed a new strategic plan for the government-sponsored enterprises last week that shifts away from the contraction goal set by previous FHFA Acting Director Ed DeMarco. “I don’t think it’s FHFA’s role to contract the footprint of Fannie Mae and Freddie Mac,” Watt said in remarks at the Brookings Institution. “Our role is to maintain an efficient credit market, and as private capital demonstrates that it will come into this market ...

Rating services and due-diligence firms have plenty of time to analyze originators of jumbo mortgages headed to the securitization market, according to industry experts speaking this week at the Mortgage Bankers Association’s annual Secondary Market Conference in New York. All the rating services are putting greater emphasis on understanding originator business practices as part of evaluating jumbo mortgage-backed securities deals, said Sharif Mahdavian, an analyst at Standard & Poor’s ...

After years of losses from holdings of nonprime mortgages, Fannie Mae and Freddie Mac reported significant income relating to subprime mortgages and Alt A loans in the first quarter of 2014. The income was largely tied to settlements of lawsuits filed by the Federal Housing Finance Agency against non-agency mortgage-backed security issuers, and losses from nonprime mortgages were also minimal during the quarter ... [Includes one data chart]

Nonprime lender Citadel Loan Servicing increased its maximum loan size this week to $1.5 million from $1.0 million. Dan Perl, Citadel’s CEO, said the lender is on track to close $14 million in originations in May and $15 million in June. He added that Citadel is close to entering the non-agency mortgage-backed security market. Walter Investment Management revived Ditech Mortgage and the lender will offer jumbos, among other products ... [Includes four briefs]

In a report released last week, the Financial Stability Oversight Council recommended that its members, federal regulators, should finish risk-retention requirements as part of an effort to facilitate “increased private mortgage market activity.” The rulemaking was mandated by the Dodd-Frank Act, which set an April 2011 deadline for issuance of a final risk-retention rule that would cover non-agency MBS, commercial MBS and non-mortgage ABS. The rule will require securitizers to retain a 5 percent interest, although this would be waived for transactions backed by “qualified” assets, including qualified residential mortgages. The Department of Housing and Urban Development, Federal Deposit Insurance Corp., Federal Housing Finance Agency, Federal Reserve, Office of the Comptroller of the Currency and Securities and Exchange Commission issued...

In a few months, mortgage insurance giant Radian Group will close on its $305 million cash purchase of Clayton Holdings, ending the “independent” status of one of the nation’s largest MBS due-diligence firms. Almost all the larger due-diligence companies have been gobbled up by larger players over the past 18 months. Most of the acquirers have other interests in the residential finance industry and are betting on the eventual return of the non-agency MBS market. That could be...

Standard & Poor’s ranked as the top rating service in the non-mortgage ABS market and also claimed the top spot in the sputtering non-agency MBS sphere, according to a new Inside MBS & ABS ranking of first-quarter activity. S&P rated seven of the 11 non-agency MBS issued in the first three months of 2014, or 78.0 percent based on dollar volume. Once the perennial leader in non-agency MBS ratings, S&P’s market share has been around 40.0 percent in recent years. DBRS ranked...[Includes two data charts]

Standard & Poor’s is seeking comments on a proposal for assessing operational risk posed by key transaction parties such as servicers in structured finance transactions. The request for comments follows a similar request from S&P in 2011. “We made a number of changes to the previous request for comment in view of the responses we received and our desire to enhance the risk considerations under the proposed operational risk framework,” said Joseph Sheridan, S&P’s criteria officer. “We also expanded the proposal’s scope. Where we believe operational risk could lead to credit instability and a ratings impact, the proposal would call for rating caps that limit the securitization’s maximum potential rating.” The rating service is proposing...

Bayview Asset Management announced late last week that it will delay the issuance of a non-agency MBS backed by re-performing subprime mortgages with an unpaid principal balance of $215 million. The delay was prompted by concerns about property valuations and loss severity. Standard & Poor’s issued a presale report on Bayview Opportunity Master Fund Trust 2014-9RPL on April 28, and the deal was scheduled to close May 12. The MBS was set to receive a AAA rating from S&P, but the rating service said it withdrew its preliminary rating due to Bayview’s extension of the planned closing date. The delay in closing was prompted...

The retained mortgage portfolios of Fannie Mae and Freddie Mac continued to decline through attrition during the first quarter of 2014 as the two government-sponsored enterprises reported some $9.3 billion in profit, due largely to non-agency MBS legal settlements. The two GSEs held a combined mortgage-investment portfolio of $902.1 billion at the end of March, down 5.2 percent from the previous quarter. The biggest decline was in MBS holdings, down 7.3 percent, including an 8.3 percent drop in Fannie’s and Freddie’s holdings of their own MBS. Wall Street investment bankers and non-agency MBS issuers paid...[Includes one data chart]