Delinquencies on non-agency MBS will likely increase temporarily due to Hurricane Sandy, according to industry analysts, but long-term losses due to the storm are expected to be minimal. Insurance will play a key factor in overall losses, and estimates vary significantly on the extent of coverage in the affected areas. Moody’s Investors Service projected this week that non-agency MBS are unlikely to suffer material losses due to Sandy even though the affiliated Moody’s Analytics estimated the damage to residential housing from the storm will hit $10.5 billion. “Even if damages exceed...

Redwood Trust late last week reported net income of $40.0 million for the third quarter of 2012, including $3.0 million in net gains on the $372.0 million of non-agency MBS issuance and whole loan sales the real estate investment trust completed during the period. Redwood officials said the company is well-positioned for growth in non-agency MBS issuance, commercial MBS issuance and soon agency origination activity. In a quarterly review, company officials noted that some have called the REIT “crazy” for resuming issuance of non-agency MBS after the financial crisis of 2007. Redwood has issued eight non-agency MBS since April 2010 totaling $2.6 billion. The REIT said...

“The return of non-agency MBS for prime loans is a lot further along than market observers might think,” officials at Redwood Trust said last week. The company said its goal is to issue $900 million or more in non-agency MBS each quarter within the next 12-to-18 months and eventually finance mortgages for prime borrowers “who do not fit into today’s tight credit box.” Through 10 months in 2012, Redwood averaged $498.31 million in quarterly non-agency MBS issuance, according to the Inside Mortgage Finance ...

The Securities and Exchange Commission has been quietly meeting with investors in non-agency mortgage-backed securities looking for leads to bring regulatory actions. Reaction from investors to the SEC’s outreach has been decidedly mixed, though Reid Muoio, a deputy for the SEC’s structured and new products unit, said the SEC is working to improve regulation on behalf of investors. Speaking at the recent ABS East conference sponsored by Information Management Network in Miami, Muoio detailed an SEC outreach program that was apparently previously undisclosed. He said that a ...

Investors interested in buying new non-agency mortgage-backed securities suggest that the wide variety seen in the pooling and servicing agreements and reporting of vintage non-agency MBS is insufficient. Many investors at the recent ABS East conference in Miami sponsored by Information Management Network called for standardization. “Investors clearly welcome standardization,” said Dapeng Hu, a managing director at BlackRock, which manages more than $150.0 billion in MBS investments ...

Underwriting standards for subprime mortgages and borrower demand for such loans remained unchanged in the third quarter of 2012 compared with the previous quarter, according to the Federal Reserve’s senior loan-officer opinion survey on bank lending practices. While 64 banks surveyed reported offering prime mortgages, only four reported offering subprime mortgages and 23 reported offering nontraditional mortgages. Underwriting and demand for nontraditional mortgages ... [Includes two briefs]

Non-agency MBS investors, issuers and the rating services appear to favor a new framework for representations and warranties that would incorporate provisions recently established by the Federal Housing Finance Agency for Fannie Mae and Freddie Mac MBS. The new agency framework includes standardized provisions with three-year sunsets for certain repurchase obligations. At the ABS East conference sponsored by Information Management Network in Miami last week, Rebecca Dorian, head of non-agency MBS and ABS trading at Morgan Stanley, said the FHFA’s rep and warrant framework could be scaled for the non-agency market. In fact, she said such standardization is necessary for non-agency MBS. Rep and warrant provisions in pooling and servicing agreements on outstanding non-agency MBS vary...

Basel III capital requirements proposed by federal regulators will have a significant negative impact on U.S. bank holdings of agency and non-agency MBS, according to industry participants. The capital requirements have yet to be finalized and are currently scheduled to begin being phased in Jan. 1 with full implementation in 2018. In June, the Federal Deposit Insurance Corp., the Federal Reserve and the Office of the Comptroller of the Currency proposed rules to implement Basel III capital standards – the most comprehensive overhaul of the U.S. bank capital framework since Basel I was implemented in 1989. Comments were due last week, and strong warnings were submitted by trade groups representing MBS market participants, banks and mortgage lenders. “If the Basel III [proposed rule] were implemented...

Mortgage lenders reported solid increases in loan originations during the third quarter of 2012, leading to a surge in securitization activity at Fannie Mae and Freddie Mac. Single-family mortgage originations totaled $475.0 billion during the third quarter, according to a new Inside Mortgage Finance analysis. That was up 9.2 percent from the second quarter of the year and marked the highest quarterly origination volume since the end of 2010, when an earlier refi surge pushed production to $520.0 billion. The strong third quarter suggests...[Includes two data charts]

Attendees at the ABS East conference sponsored by Information Management Network this week in Miami were more optimistic about the MBS and ABS markets than they have been in some time. So optimistic, in fact, that some industry participants are already concerned about bubbles forming in the still recovering securities markets. “If this conference is any indicator, it looks like everybody feels there’s real vitality,” said Lewis Ranieri, chairman and founding partner of Ranieri Partners. “I haven’t seen a conference like this in quite a while.” Close to 3,000 people attended the event. Jay Steiner, a managing director at Deutsche Bank, noted...