The $25.0 billion servicing settlement is just the latest step toward standardized servicing regulation, according to industry analysts. Many non-agency servicers have taken major steps to prepare for an overhaul of servicing regulation, though increased costs are a concern. “It appears that non-agency MBS servicers have already made significant operational changes in an effort to address process deficiencies identified in this settlement and by regulators,” Fitch Ratings said. As with federal consent orders several servicers agreed to last year ...

American Home Mortgage Servicing and Carrington Capital Management agreed last week to settle a lawsuit regarding alleged improper servicing by American Home on $128.1 million in non-agency mortgage-backed securities owned by Carrington. The lawsuit was filed in 2009 by Carrington, which claimed American Home had conducted “fire sales” of delinquent properties in the securities in an effort to repay debt. At the time, American Home denied the charges. The terms of the settlement were not released. [Includes two briefs]

A new report from Fitch Ratings finds that risk appetite is returning to the U.S. triparty repo market, thanks in part to deeply discounted collateral, much of which is in the form of Alt A and subprime residential MBS and collateralized debt obligations. Fitch’s study of the market is based on repo transaction information drawn from a sample of the 10 largest U.S. prime money market funds’ financial statements. Fitch’s sample encompasses about $90 billion in repo transactions as of the end of August 2011, which represents slightly more than 5 percent of the $1.6 trillion U.S. triparty repo market...

The Federal Reserve Bank of New York ended a week of speculation in the non-agency MBS market with the sale, through competitive bidding, of $6.2 billion of MBS linked to the taxpayer bail-out of mega-insurer AIG. The winning bid came from Goldman Sachs, one of five firms the Fed invited to submit bids on the multibillion-dollar Maiden Lane II (ML II) portfolio of subprime MBS held by the agency. The other bidders included the securities arms of Morgan Stanley, Royal Bank of Scotland, Barclays and Credit Suisse. This week’s transaction followed a $7.0 billion MBS sale on Jan. 19 to Credit Suisse from the same...

Federal and state enforcement agencies late last week launched a broad new initiative to investigate and develop litigation on fraud and misconduct in the non-agency MBS market, issuing civil subpoenas to 11 financial companies. The RMBS Working Group is being co-chaired by five officials: two assistant attorneys general in the Justice Department, the head of enforcement at the Securities and Exchange Commission and state attorneys general from New York and Colorado. Some 55 DOJ officials are participating, including 15 attorneys and 10 Federal Bureau of Investigation agents, with 30 more attorneys...

Issuance of new non-agency mortgage-backed securities will resume when the financing structure is economical, according to attendees at the American Securitization Forum’s ASF 2012 conference last week in Las Vegas. Just what it will take to make non-agency securitization economical remains to be seen, though some suggest that regulatory uncertainty plays a major factor. “We have not seen much of a test of the non-agency market because it’s not economical,” said Peter Sack, a managing director and co-head of real estate and mortgage finance at Credit Suisse. “The bank portfolio bid is strong.” ...

Redwood Trust’s four non-agency mortgage-backed securities – the latest of which was issued last week – have been generally well received by MBS investors. However, some investors, potential issuers and even the rating services have raised concerns regarding the non-agency MBS ratings process, both for Redwood and for other potential securitizers. A senior official at one of the rating services suggested to Inside Nonconforming Markets that ratings shopping is still occurring, and that the Redwood deals have been rated by the firms with the lowest credit-enhancement requirements ...

Firms participating in the Public-Private Investment Program with a focus on non-agency mortgage-backed securities all took losses in the fourth quarter of 2011 compared with the previous quarter, according to an analysis by Inside Nonconforming Markets. The Oaktree PPIP Fund – which only invests in commercial MBS – was the only public-private investment fund to increase its net internal rate of return since inception in the fourth quarter of 2011, Treasury Department data show. The Treasury cautioned that it is ... [Includes one data chart]

The non-agency portion of the Home Affordable Modification Program is set for significant changes, according to an announcement last week by the Treasury Department. Investors will receive greater incentives for principal reduction mods, eligibility requirements for HAMP will be loosened and the program will be extended through the end of 2013. “Implications for agency MBS investors seem limited but are very meaningful for non-agency investors,” said analysts at Barclays Capital. Incentive payments to loan owners will triple for principal reduction HAMP mods. Previously, the payments ranged from six cents-on-the-dollar to 18 cents-on-the-dollar ...

Investors have expressed a keen interest in programs that would facilitate bulk sales of real estate-owned properties. However, few are optimistic that such a program will come to fruition. Based on cost figures provided by Carrington Holding Company, Vincent Fiorillo, a portfolio manager at DoubleLine Capital, suggested investors could easily earn returns of 9.0 percent by renting REO properties. “This is a very attractive alternative investment opportunity,” Fiorillo said at the American Securitization Forum’s ASF 2012 conference last week in Las Vegas ...