Hedge funds are paying as much as 20 cents on the dollar for preferred stock in Fannie Mae and Freddie Mac. Meanwhile, the GSE buyback war is not over yet.

Investors in subordinate tranches of recently issued non-agency jumbo mortgage-backed securities have seen strong returns on the investments. Real estate investment trusts have focused on the assets, which are likely to be subject to risk-retention requirements going forward. “We like the loan assets and the ability to diversify our funding in this manner where we don’t have a duration gap, there is no margin risk, and the assets and liabilities amortize and prepay at the same rate, eliminating the need for ...

Redwood Trust has recently put an increased emphasis on acquiring purchase mortgages. The loans have higher loan-to-value ratios than refinances included in Redwood’s non-agency mortgage-backed security issuance, a potential concern according to Kroll Bond Rating Agency. Redwood said it acquired $955 million in purchase mortgages from its correspondent lenders in the first quarter of 2013, up from $550 million the previous quarter. The purchase-mortgage share of Redwood’s acquisitions is also increasing ...

After years of holding onto investments in non-agency mortgage-backed securities even as prices declined significantly, the government-sponsored enterprises are preparing to sell some of their $101.5 billion in non-agency MBS holdings. Freddie Mac is offering $1.0 billion in non-agency MBS for sale with plans to unload as much as $5.0 billion this year, if pricing for the securities remains strong. A spokesman for the GSE said the sales are part of an effort to meet goals set by ... [Includes one data chart]

A significant increase in the non-agency sector’s share of mortgage finance could be completed with a revised infrastructure for non-agency mortgage-backed securities, according to Edward DeMarco, acting director of the Federal Housing Finance Agency. He said the model wouldn’t need to rely on a government guaranty to attract funding to the mortgage market, but would look to standardization and rules for enforcing contracts. While many housing finance reform proposals have called for a re-creation of ...

Activity in the non-agency jumbo market could play a big role in determining how to reform the government-sponsored enterprises, according to industry analysts. While policymakers consider what to do with Fannie Mae and Freddie Mac, some are calling for a larger role for the jumbo market as a test for GSE reform. Mark Willis, a resident research fellow at New York University’s Furman Center for Real Estate and Urban Policy, said the Federal Housing Finance Agency should increase the GSEs’ guaranty fees for ...

Deephaven Mortgage, a new subprime lender headed by a former Goldman Sachs official, is seeking warehouse lines of credit, according to one banker. The banker, requesting anonymity, said his institution was approached by the North Carolina-based Deephaven in the past few weeks but decided to pass on the credit. The warehouse lender said he believes that, for now, the traditional warehouse community will not extend credit to subprime lenders, even if they have high downpayment requirements and [Incluides two briefs]

SunTrust Mortgage is in settlement discussions with the Department of Housing and Urban Development and the Department of Justice over alleged violation of the False Claims Act in connection with the bank’s origination of FHA loans. The Atlanta-based mortgage lender disclosed the ongoing talks in a recent regulatory filing after being notified by the agencies of the results of their preliminary investigation during the first quarter of 2013. Even with the ongoing settlement talks, SunTrust continued to deny any wrongdoing, making clear its disagreement with the government’s analysis and methodology. It gave no further ...

Changes to the FHA’s mortgage insurance premium cancellation policy, which take effect on June 3, could ultimately cause some FHA loans closed after the effective date to become a “higher-priced mortgage loan” that no investor would want to purchase, lenders warned. Eliminating the MIP cancellation and requiring insurance to be kept for the life of the mortgage loan will raise the annual percentage rate 150 basis points above the average prime offer rate (APOR) index. This will trigger a higher-priced mortgage loan (HPML) designation for some ...

FHA jumbo loan originations increased in the first quarter of 2013 as well as from the same period last year pending hikes in the mortgage insurance premium and the required downpayment on loans above $625,500, according to Inside FHA Lending’s analysis of FHA data. FHA jumbo lenders produced an estimated $5.44 billion in loans over $417,000 during the first three months of the year, up 6.6 percent from the fourth quarter of 2012 and 14.0 percent higher compared to the volume from a year ago. Consumers continued to use the FHA jumbo product despite FHA’s decision to raise the annual mortgage insurance premiums on ... [2 charts]