The biggest decline has been in non-agency MBS holdings, mostly Alt A and subprime MBS that have been subject to fast liquidation rates.

The new documentation was released in conjunction with a non-agency RMBS reform symposium held in New York by SFIG and Information Management Network.

Although residential lenders are coming off a better than expected production quarter – and enjoying a decent last three months of the year – analysts and investors seem undecided on whether there’s opportunity in the market or it’s time to stay on the sidelines. Several high profile publicly traded shops that are considered “high touch” specialists – Nationstar Mortgage, Ocwen Financial and Walter Investment – continue to trade at steep discounts to their 52-week highs with all three facing possible class-action lawsuits from angry investors who’ve seen billions of dollars in stock equity evaporate over the past year. And then there’s...

According to one advisor who saw the original bid package, the delinquency rate on the non-agency MSRs are north of 20 percent.

“It has been clear to us for some time that the market has a need for products like this," said Two Harbors executive William Roth.

Some investors have pointed out that Ocwen’s origination volume is small compared to its MSRs and that historically the company has never been competitive in the origination market.

Total non-agency MBS held by banks and thrifts in the second quarter of 2014 fell 9.5 percent compared to 2Q13, largely driven by runoff.

Redwood insists the company prefers to issue jumbo MBS rather than sell whole loans, but the current pricing is just too good to pass up.

Fannie and Freddie have been exploring the adaptation of alternative credit scores for months, but have yet to take action.

Apollo's Commaroto said the REIT is bidding on loans, but is still considering whether to acquire non-QMs that way or partner with a lender to receive a more steady flow of product.