Mortgage securitization rates remained at record levels through the first half of 2011, reflecting a sharp decline in new primary market production and a surge of agency issuance early in the year. A new Inside MBS & ABS analysis reveals that mortgage securitization activity in the first half of 2011 equaled 96.0 percent of loans originated during the same period. That compares to an 84.9 percent securitization rate for all of 2010 and an 85.6 percent rate – the record high – back in 2009. Because it can take weeks or even months before a newly originated mortgage hits the capital markets as collateral backing an MBS, there is a significant slippage between... [Includes one data chart]

The ongoing debate over the need for a government guarantee to sustain the benefits of the to-be-announced MBS market moved this week to the Senate Housing, Banking and Urban Development Committee, where researchers covered both sides of the issue for a group of lawmakers who aren’t likely to act on their counsel any time soon. “Proponents of privatization ignore that the jumbo market does benefit from a government guarantee indirectly in multiple ways,” said Adam Levitin, professor of law at Georgetown University. “The jumbo market has long aped the standards set by the [government-sponsored enterprises] in the conforming market, including...

The Federal Housing Finance Agency’s legal action late last week against many of the nation’s largest financial institutions on the grounds they misled Fannie Mae and Freddie Mac about the quality of subprime and Alt A MBS purchased by the government-sponsored enterprises has few positives but plenty of negative potential consequences for the market, experts say. The 17 separate lawsuits filed by the FHFA seek unspecified damages on $196 billion in mortgage securities the two GSEs purchased, mostly between 2005 and 2008. The agency conducted extensive loan-level reviews that allegedly revealed widespread discrepancies between... [Includes two pages of data]

Originations of non-agency jumbo mortgages declined in the second quarter of 2011, along with the rest of the mortgage market, but a new ranking and analysis by Inside Nonconforming Markets shows the jumbo sector still running higher than the pace in the first half of last year. Moreover, a number of lenders have boosted their jumbo originations or are looking to expand into the market as conforming loan limits are set to decrease. ... [includes one data chart]

New Penn Financial continued to expand its non-agency offerings this week with the launch of a correspondent channel. The lender said it will buy non-agency mortgages from approved clients and hold the loans in portfolio. “There are limited options today for correspondent lenders to originate high quality loans that do not fit agency standards,” said Bob Wexler, head of New Penn’s correspondent division. “New Penn’s proprietary loan programs fill a major gap in today’s market and the correspondent channel helps us reach more of these borrowers.” ...

Facing a statute of limitations deadline, the Federal Housing Finance Agency filed lawsuits against 17 firms last week in an effort to recover losses the government-sponsored enterprises suffered on their investments in non-agency mortgage-backed securities. The FHFA claimed violations of securities laws, alleging that non-agency MBS prospectuses contained material false statements and omissions. The lawsuits relate to more than $196.2 billion in non-agency MBS purchased by the GSEs. The GSEs’ combined holdings of subprime and Alt A MBS have declined since at least the fourth quarter of 2007 when they totaled $217.2 billion, according to an analysis by Inside Nonconforming Markets,. ...

The American Securitization Forum positioned its new model repurchase principles as a better option to restore investor confidence in non-agency mortgage-backed securities than the risk retention required by the Dodd-Frank Act. “The risk-retention rules proposed by regulators are not sufficiently tailored to different asset classes and will likely cause a host of negative unintended consequences,” said Tom Deutsch, executive director of the ASF. ...

The proposed settlement Bank of America is hoping to reach with non-agency mortgage-backed security investors continues to face new hurdles, but analysts expect a settlement will eventually be reached. The deadline to intervene in the settlement was set for the end of August by the state court overseeing the settlement. However, shortly before the deadline, a group of MBS investors opposing the $8.5 billion settlement had the case moved from a New York state court to federal court, further complicating the settlement. ...

Real estate investment trusts that invest in mortgage-backed securities are on the defensive after the Securities and Exchange Commission said last week that it is considering revising rules for mortgage REITs. “Mortgage REITs provide private capital to these markets, while allowing individual investors to opt in or out of the associated risks,” Thomas Siering, president and CEO of Two Harbors Investment, said this week in a letter to the REIT’s shareholders. ...

Ocwen Financial’s purchase of Litton Loan Servicing at the beginning of this month was contingent on the non-prime servicer implementing new practices based on an agreement with New York regulators. The Federal Reserve also took an enforcement action against Goldman Sachs last week relating to Litton’s servicing practices. “Our agreement sets a new higher standard for the residential mortgage servicing industry,” said Benjamin Lawsky, New York’s superintendent of financial services. “Goldman Sachs, Ocwen and Litton have now all agreed to put the rights of homeowners ahead of their profit margins by implementing these changes.” ...