The Financial Industry Regulatory Authority reached settlements last week with two non-agency mortgage-backed security issuers regarding delinquency data and other reporting requirements. Three other non-prime servicers also recently settled with regulators regarding servicing practices. FINRA fined Credit Suisse Securities $4.5 million and Merrill Lynch $3.0 million for alleged violations of Regulation AB. The issuers neither admitted nor denied the charges. “Credit Suisse and Merrill Lynch failed to monitor and supervise the reporting of historical delinquency rates, depriving investors of...

Officials with Home Equity Securities have started to lobby the Obama administration regarding an alternative to home-equity loans known as the home-equity fractional interest security. HES said the HEFI security could create a market as big as the U.S. stock market without increasing mortgage risk. Under HES’ proposal, a shared-equity investor would match a borrower’s downpayment and share in any home price appreciation. HES received a patent for the product in 2009. HES officials envision...

Jumbo mortgages accounted for 7.7 percent of new loan originations in the first quarter of 2011, the highest share for the sector since 2008. A number of correspondent lenders have also expanded their jumbo programs in 2011. Some $25.0 billion in non-agency jumbos were originated in the first quarter of 2011, according to estimates by affiliated publication Inside Mortgage Finance. That was down 16.7 percent from the previous quarter, while overall originations declined by 35.0 percent during the period. The relative strength of the jumbo market increased...[Includes one data chart]

The legacy of toxic subprime and Alt A MBS from Countrywide Financial continued to spread last week, with a California appeals court deciding to allow a class action involving a number of pension funds and other institutional investors against the lender to proceed. The plaintiffs allege that Countrywide and a number of its subsidiaries, officers and U.S. investment banks violated the Securities Act of 1933 by making materially false and misleading statements in over 450 prospectus supplements relating to the issuance of more than $300 billion in subprime and Alt A securities. Specifically, plaintiffs allege the defendants misrepresented the quality of...

Conventional conforming mortgage production took the heaviest hit in new lending during the first quarter as all four corners of the single-family originations market recorded sharp declines, according to a new Inside Mortgage Finance ranking and analysis. Originations of conventional mortgages that meet conforming loan limits sank 40.0 percent from the fourth quarter of 2010, hitting an estimated $213.0 billion. The conventional conforming market still had the biggest role in the market, accounting for 65.5 percent of new originations, but a sharp drop in refinance activity hit the sector hard. Government-insured lending was also... [Includes two data charts]

Redwood Trust plans to issue two more jumbo mortgage-backed securities this year, the real-estate investment trust announced this month. Martin Hughes, president and CEO of the firm, said officials hope to issue a total of $800 million to $1.0 billion in jumbo MBS in 2011, including the $290.0 million security issued earlier this year. Officials at the REIT said they hope to issue their next jumbo security in the third quarter. At the end of April, Redwood had $87.0 million in loans purchased and held on balance sheet for future securitization along with a $200.0 million pipeline. Redwood is seeing strong demand from correspondent lenders looking to...

Turning profits by investing in distressed mortgages has become increasingly difficult, according to distressed asset investors. Many investors cannot get the internal rate of return necessary to invest in this space, according to Steven Grundleger, executive vice president of capital markets at FNC. Grundleger and other market participants detailed the state of the distressed asset sector at the recent secondary market conference hosted by the Mortgage Bankers Association. Some 47.7 percent of home sales completed in April involved distressed borrowers, according to the Campbell/Inside Mortgage Finance HousingPulse Tracking Survey, a monthly measure of...

Performance of Home Affordable Modification Program mods does not vary much between non-agency mortgages and agency mortgages, according to a new analysis by Inside Nonconforming Markets. Performance has been generally lackluster, although differences have emerged among non-prime HAMP servicers. As of the end of March, 1.56 million trial HAMP mods had been started, including 716,006 on non-agency mortgages, according to the Special Inspector General for the Troubled Asset Relief Program. And 670,186 permanent HAMP mods had been started, including 309,027 on non-agency mortgages. Some 46.6 percent of trial mods started on... [Includes one data chart]

Two Harbors Investment Corp. announced this week that it plans to issue a $250.0 million jumbo non-agency mortgage-backed security this year. "We believe we can create mortgage credit investments at attractive yields resulting from high-quality loan origination and securitization while further extending the runway for the non-agency allocation in our portfolio," said Thomas Siering, president and CEO of Two Harbors, a real estate investment trust. He said Two Harbors took its first step toward setting up a securitization issuance program by partnering with Barclays Bank this week to close on a $100 million mortgage loan warehouse facility, subject to... [Includes one graph]