In another legacy residential MBS legal action, the California Public Employees’ Retirement System this week reached a record $130 million settlement with Moody’s Investors Service over the ratings service’s allegedly erroneous ratings of AAA-rated structured investment vehicles in the run-up to the financial crisis. Back in 2009, CalPERS sued Moody’s – along with Standard & Poor’s and Fitch Ratings – after the pension fund claimed massive losses from investments in three structured investment vehicles that depended on the liquidity of assets that proved to be illiquid, such as subprime MBS, collateralized debt obligations and other ABS. In the lawsuit, CalPERS accused Moody’s of making “negligent misrepresentations” by assigning its highest credit rating to the investments. This caused significant losses as the market ...
Falling oil prices may have little impact on residential MBS even if distressed prime jumbo borrowers in oil-producing states were to default on their loans, according to Standard & Poor’s. The rating agency’s optimistic conclusion may be good news to investors concerned that job cuts in the oil industry will lead to high default rates among prime jumbo borrowers, particularly in states where a high percentage of workers are in oil production. Market information suggests that values of prime jumbo MBS in oil-producing states are being affected, as the market factors in the risk of losses arising from borrower defaults in these regions, the S&P report said. However, it is unclear whether the additional spread on MBS with high concentrations ...
Two Harbors Investment is preparing to issue a jumbo mortgage-backed security that will include loans subject to the TRID integrated disclosure rule. The deal could help resolve the so-called “TRID-lock” seen in the jumbo secondary market as industry participants try to sort out the liability posed by the controversial rule. “TRID has proved to be a very strong headwind,” Diane Wold, a managing director at Two Harbors, said last week at the ABS Vegas conference produced by ...
Bank and thrift first-lien portfolio holdings continued to grow in 2015, including a sharp increase in the fourth quarter, according to a new ranking and analysis by Inside Nonconforming Markets. Banks and thrifts held a total of $1.87 trillion in first-liens in portfolio at the end of the fourth quarter of 2015, up 0.9 percent from the end of the previous quarter and up 3.4 percent from the fourth quarter of 2014. The increase in holdings was largely driven by ... [Includes one data chart]
One of the major obstacles to increased issuance of non-agency mortgage-backed securities remains the lack of a deal agent to protect investors. Until last week, investors had not even agreed on the general responsibilities for a deal agent, suggesting that the implementation of the concept was a long way off. A working group, co-led by Alessandro Pagani, head of securitized assets at Loomis, Sayles & Company, announced principles for a deal agent last week ...
Two nonbanks with jumbo conduit operations have faced issues recently. Premium Point Investments recently announced the New Issue Opportunity Fund will no longer invest in new jumbo mortgage-backed securities from WinWater Home Mortgage. Premium Point is an asset-management firm that established WinWater in late 2013. Premium Point said the NIOF purchased approximately $3.3 billion in whole loans and invested in 10 mortgage-backed securities issued by ...
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