Analysts expect the U.S. economic recovery to continue on a slow, weak path into 2013 with the potential for a new recession that could weaken the residential MBS market. At Standard & Poor’s, analysts predict a “slow and uneven” economic recovery with a 15 percent to 20 percent chance of another recession that would be less severe than the 2008-2009 financial crisis but potent enough to sap the MBS market. S&P assumes a reversal in home prices and unemployment rising to near 9 percent in 2013, which could hamper borrower capacity to make their mortgage payments. Overall, S&P’s outlook for the single-family MBS market is...

As part of negotiations regarding the fiscal cliff, the Obama administration and Democrats in the House are seeking principal reduction loan modifications for borrowers with negative equity. The Treasury Department has reportedly proposed a program targeting borrowers with mortgages in non-agency mortgage-backed securities while the debate about principal forgiveness for loans held by the government-sponsored enterprises has also been rekindled. The Obama administration would neither confirm nor deny the non-agency proposal, but details regarding the Market Rate Modification program have prompted talk among industry participants and a detailed analysis. “In order to assist...

Fannie Mae and Freddie Mac this month completed implementation of the latest round of guaranty fee hikes, this one mandated by their regulator as a move to reduce the footprint of the government-sponsored enterprises and draw more private capital into the mortgage market. Experts say the 10 basis point fee hike will have a slight positive impact in the near term, but future moves in the same direction could help close the gap between agency and non-agency mortgage-backed securities. The Federal Housing Finance Agency ordered the GSEs to raise g-fees by 10 bps for cash deliveries starting in November, and for MBS transactions beginning in December. At the time, the FHFA said...

A new non-agency jumbo MBS from a subsidiary of Credit Suisse Group includes some key differences compared with Redwood Trust deals, while pumping life into the non-agency market. DLJ Mortgage Capital issued a $329.89 million non-agency jumbo MBS late last week via a private placement; it was the company’s third of 2012. CSMC Trust 2012-CIM3 received a AAA rating from Standard & Poor’s with credit enhancement of 5.85 percent on the top-rated tranche. The new Credit Suisse deal included...

To effect the types of changes required in order to bring private capital back to the housing finance market, a “collaborative effort” among market participants, regulators and policymakers will be necessary, noted the head of the Federal Housing Finance Agency. FHFA Acting Director Edward DeMarco told attendees of a Securities Industry and Financial Markets Association conference in New York City late this week that the existing secondary market infrastructure is “broken” and it will take agreement among market participants to decide the changes necessary in order to mend it better than ever. “As we think about building a new infrastructure for the secondary mortgage market, we know...

Participants in the non-agency mortgage-backed security market are largely opposed to the Federal Housing Finance Agency’s proposal to create a platform to issue standardized non-agency MBS. While the FHFA suggested that the platform could revive the non-agency market, industry participants suggest that many issues besides a platform are hindering non-agency MBS issuance. “Key elements of the platform that are advantages for government-sponsored enterprise securitizations, such as standardization ...

A federal court in California recently dismissed claims by the Federal Deposit Insurance Corp. related to non-agency mortgage-backed securities purchased by a bank in 2007 and 2008. According to the ruling, the FDIC should have filed the lawsuit long ago and tolling did not render the claims as timely. FDIC v Countrywide Financial relates to $62.6 million in AAA-rated Countrywide MBS purchased by Strategic Capital Bank in 2007 and 2008. The FDIC was appointed as receiver of the bank on May 22, 2009 ...

Wells Fargo announced that the Securities and Exchange Commission recently completed an investigation of the company’s disclosures from mortgage-backed security offering documents and no enforcement action will be taken. Arcus Lending, a mortgage broker and a direct lender in California, recently started offering an 80/10/10 mortgage in an effort to allow borrowers to avoid private mortgage insurance. “There is a huge need for such a program and very few lenders ... [Includes two briefs]

New York Attorney General Eric Schneiderman said he plans to file more lawsuits against non-agency MBS issuers using the Martin Act, which allows platform-wide cases as opposed to cases focused on specific deals. “It’s not about one deal or five deals or 10 deals, it’s about the entire course of conduct,” he said last week after filing a platform-wide lawsuit against Credit Suisse Securities. The lawsuit was filed as part of the RMBS Working Group’s efforts, including a similar lawsuit Schneiderman filed in October against JPMorgan Chase. “The actions you have seen...

While the nine rating services registered as Nationally Recognized Statistical Rating Organizations were largely compliant with Securities and Exchange Commission regulations and recommendations, the agency found some significant issues with the ABS rating process. In a review covering the government’s 2012 fiscal year ending in September, the SEC said one of the top three firms appeared to change its method for calculating a key financial ratio in rating certain asset-backed securitizations, but failed for several months to publicly disclose the change and its effects on the ratings. The agency includes non-mortgage ABS, commercial MBS and non-agency MBS in a single category of asset-backed securitizations. “Further, it appears the NRSRO did not consistently apply...