Fitch Ratings released its “initial perspective” this week on how the Consumer Financial Protection Bureau’s ability-to-repay rule and requirements for qualified mortgages will impact ratings for new non-agency MBS. That makes Fitch the first rating service to provide formal insight on how the CFPB rule, which takes effect Jan. 10, will impact jumbo mortgage securitization. Fitch is considering requiring issuers to state the QM status of any mortgage to be included in an MBS, putting a greater emphasis on lender compliance and due diligence, and a focus on representations and warranties for compliance with the ATR rule and QM standards. “The rating approach will likely focus...

Foreclosure timelines and servicers’ emphasis on loss mitigation has dampened improvements to loss severities on non-agency MBS, according to Fitch Ratings. The rating service said this week that while national average home prices have increased by 14 percent in the past year, loss severities on liquidated properties in non-agency MBS have improved by only 5 percent. In the third quarter of 2013, it took an average of 32 months to liquidate a mortgage included in a non-agency MBS, according to Fitch, more than twice as long as average liquidation timelines in 2008. “Longer timelines translate...

Citigroup Global Markets Realty last week issued the first jumbo mortgage-backed security in more than a month and Redwood Trust is preparing a deal for next week. However, industry participants suggest that jumbo MBS issuance will remain limited through at least early 2014 due to a lack of demand from investors and strong portfolio appetite jumbos among from big banks. Citi’s $209.95 million jumbo MBS, its first in the new era of the non-agency market, wasn’t met with strong demand, according to ...

The weak market for jumbo mortgage-backed securities has prompted Redwood Trust to look into other activities beyond a focus on jumbo mortgages. The real estate investment trust started aggregating agency mortgages in October. Martin Hughes, Redwood’s CEO, said the conforming-mortgage activity allows Redwood to create mortgage-servicing rights to hold as investments and potentially participate in risk-sharing activities with the GSEs at the originator level. “This market opportunity is many times ...

Real estate investment trusts working to build their jumbo mortgage-backed security operations note that while the environment is currently challenging, they are optimistic about the long term. “What we’re trying to do is have an originator network in place so that we can take advantage of the opportunities,” said Bill Roth, CIO of Two Harbors Investment. “And it may not be in prime jumbo in the short run.” The REIT issued a $434.17 million jumbo MBS in August, its first. Two Harbors said it ...

With qualified-mortgage underwriting requirements set to take effect Jan. 10, the rating services are beginning to detail the role QM status will play in ratings for non-agency mortgage-backed securities. Fitch Ratings appears to be the furthest along in adjusting its ratings process to account for the Consumer Financial Protection Bureau’s ability-to-repay rule and QM standards. The rating service this week released its initial perspective for rating non-agency MBS with loans originated in a QM world ...

RBS Securities agreed to settle charges levelled by the Securities and Exchange Commission that the underwriter mislead investors in a $2.2 billion subprime mortgage-backed security offered in 2007. “RBS knew or should have known at the time that almost 30 percent of the loans backing the offering deviated so much from the lender’s underwriting guidelines that they should have been kicked out of the offering entirely,” the SEC said of Soundview Home Loan Trust 2007-OPT1. The mortgages in question were ...

After a relatively strong first eight months of the year, no jumbo MBS were issued in September or October. Although investor interest seems tepid, the market is showing signs of life as Citigroup issued its first post-crisis jumbo MBS this week, and Redwood Trust offered its first jumbo deal since August. The activity comes just weeks after Shellpoint Partners tried twice to sell a jumbo MBS, eventually pulling the deal and opting for a whole-loan sale. Pricing for jumbo MBS has improved enough for Citi and Redwood to test the market, and investors have also shown strong interest in other recent non-agency offerings. The $209.95 million Citigroup Mortgage Loan Trust 2013-J1 received...

The non-agency mortgage market is expected to take the brunt of the changes prompted by the Consumer Financial Protection Bureau’s new ability-to-repay rule and requirements for qualified mortgages. However, two months before the rule takes effect, the rating services haven’t released guidelines for how non-QMs will be rated, prompting issuers to be cautious with plans for non-QMs. Kroll Bond Rating Agency was the only rating service to offer details to Inside MBS & ABS in response to questions about ratings for non-agency MBS once the QM requirements take effect. Glenn Costello, a senior managing director at KBRA, said the securitization of non-QM loans will require additional credit enhancement relative to QMs. DBRS and Standard & Poor’s declined...

The Federal Housing Finance Agency has picked two “final” candidates to be CEO of the joint venture developing a common securitization platform for Fannie Mae, Freddie Mac and, potentially, some non-agency MBS issuers. According to industry officials close to the matter, Peter Carroll is one of the candidates to head Common Securitization Solutions, the name of the entity developing the platform. Carroll is currently the assistant director for mortgage markets at the Consumer Financial Protection Bureau. The identity of the other candidate could not be confirmed...