A unique lawsuit against Morgan Stanley was recently allowed to move forward though legal analysts questioned the ruling. The lawsuit charges Morgan Stanley with racial discrimination, claiming that the investment bank violated the Fair Housing Act by encouraging New Century Financial to offer high-risk mortgages to African-American borrowers. Disparate impact cases typically target originators, but New Century is long out of business. Morgan Stanley was hit with the lawsuit because it was ...

Three non-agency mortgage-backed security trustees filed lawsuits this week against Richmond, CA, which plans to use eminent domain to purchase mortgages with negative equity. The city recently sent letters to servicers and trustees of non-agency MBS offering to purchase 624 mortgages. If the MBS trustees do not sell the loans for the offered price of 80 percent of the current value of the properties, Richmond Mayor Gayle McLaughlin, a member of the Green Party, said the city intends to ...

The question of whether the FHA should allow the refinancing of underwater mortgages seized through eminent domain has reemerged as a key issue following a recent decision by the city of Richmond, CA, to use its authority to take over distressed mortgages for restructuring. There is a new twist to the question, however. Could FHA’s refusal to refinance such mortgages be deemed discriminatory against cities and homeowners if eminent domain programs meet the requirements of the FHA Short Refinance program? Is that tantamount to redlining? A top executive of Mortgage Resolution Partners, which developed the eminent domain strategy to help underwater homeowners at risk of foreclosure, said ...

Fannie Mae, Freddie Mac and mortgage-backed securities trustees representing investors in non-agency MBS sued the city of Richmond, CA, this week to stop it from further implementing a plan to use eminent domain authority to seize and purchase performing underwater mortgages. Wells Fargo and Deutsche Bank, acting as trustees for a group of investors that includes BlackRock, Inc., Pacific Investment Management and the government-sponsored enterprises, filed the lawsuit in federal court in San Francisco at the behest of certificate holders. The plaintiffs are asking the court to declare the “Richmond Seizure Program” unconstitutional and in violation of California laws, and to order city officials to end the program. Securitizers and investors are...

Bank of New York Mellon has come under scrutiny for its actions in the proposed $8.5 billion settlement involving Bank of America and investors in 530 non-agency MBS issued by Countrywide Financial. A trial to approve the settlement regarding repurchase requests started in June and is on a break until early September. While the proposed settlement involves a payout from BofA, which acquired Countrywide, the settlement is an agreement between BNYM and 22 institutional investors represented by the law firm of Gibbs & Bruns. The agreement was reached under Article 77 which allowed BofA to have the settlement apply to all investors in the Countrywide securities in question. “I can honestly say...

Small lenders have accounted for a growing share of contributions to non-agency jumbo mortgage-backed securities. Some deals have included more than 70 lenders, with most of the lenders contributing less than 5 percent of the volume of mortgages included in a security. While the lenders’ individual contributions to a particular jumbo MBS are small, they add up to significant market share, particularly when issuers don’t identify the lenders in prospectus documents filed with the Securities ... [Includes two data charts]

Rising interest rates haven’t stopped JPMorgan Chase and Redwood Trust from working on new non-agency jumbo mortgage-backed securities with loans originated in the lower-rate environment. Chase’s security will include mortgages with an average age of four months, while the mortgages in Redwood’s jumbo MBS are about two months old. The weighted average gross coupon on mortgages in Chase’s $345.05 million non-agency jumbo MBS is 3.79 percent, well below the average 4.68 percent interest rate quoted ...

First Republic Bank is one of the few bank originators of non-agency jumbo mortgages that has sold a significant share of its production in the secondary market in the past year. Officials at the bank said the sales have been driven by borrowers’ preference for 30-year fixed-rate mortgages and investor demand in the non-agency market, both of which have changed recently. In the first quarter of 2013, First Republic originated $2.32 billion of mortgages, including $1.85 billion in non-agency jumbo mortgages ...

New Penn Financial is one of the few lenders putting an emphasis on mortgages for borrowers that are foreign nationals. The company offers mortgages to non-U.S. citizens with rates and terms somewhat looser than those offered by other lenders operating in the niche market. “Our proprietary program offers flexibility and fewer restrictions,” New Penn said. While data on mortgages to foreign national borrowers are scarce, the loans largely appear to be a non-agency product, both held in portfolio and sometimes securitized ...

The non-agency jumbo mortgage-backed securities issued by Redwood Trust between March 2010 and November 2012 haven’t taken any losses, according to Kroll Bond Rating Agency. Delinquencies on the securities remain extremely low, and a significant portion of mortgages included in the MBS have prepaid. As of July, three of the nine non-agency jumbo MBS issued by Redwood from 2010 through 2012 had loans that were delinquent. However, the loans were only in the 30-day delinquency bucket ...