The strong growth in issuance of jumbo mortgage-backed securities seen since 2010 stumbled in 2014, according to a new ranking and analysis by Inside Nonconforming Markets. Some $9.79 billion in jumbo MBS were issued last year, down 25.4 percent from activity in 2013. Issuance has been constrained by bank portfolio demand for jumbo mortgages. The spike in interest rates in 2013 led to nine months of very low issuance. Rates have since fallen and a number of new jumbo MBS issuers have entered the market, but quarterly volume has struggled to reach the levels seen in early 2013. Those looking for a silver lining could...[Includes one data chart]
Jumbo lenders continue to loosen underwriting requirements in an effort to compete for volume. Some lenders are even offering jumbos with loan-to-value ratios as high as 95 percent, while three years ago a 70 percent LTV ratio was the norm. “We’ve seen a fairly rapid loosening of standards on jumbo loans,” said Michael Fratantoni, chief economist at the Mortgage Bankers Association, during an event hosted this week by the Urban Institute. “They’re still tight, but now you can get a 5 percent down jumbo loan. And minimum credit scores have been coming down.” The MBA’s Mortgage Credit Availability Index has shown...
Ocwen Financial agreed to a $150 million settlement with the New York Department of Financial Services in late December. Officials at the nonbank said Ocwen’s focus will shift to non-agency servicing and originations in 2015. The settlement includes a number of provisions beyond the monetary penalty. To acquire mortgage servicing rights – the fuel for Ocwen’s dramatic growth in recent years – Ocwen must receive approval from the NYDFS and meet performance benchmarks. The NYDFS will also appoint...
Bank and thrift holdings of home-equity loans continued to decline in the third quarter of 2014, according to the Inside Mortgage Finance Bank Mortgage Database. However, the two top banks increased their HEL holdings from midyear, and industry analysts expect home-equity lending to continue to increase in 2015. Banks and thrifts held a total of $991.27 billion in home-equity lines of credit, HELOC commitments and closed-end second liens as of the end of the third quarter of 2014, down 0.7 percent from the previous quarter and down 3.9 percent from the third quarter of 2013. Most of the top 10 bank and thrift HEL lenders saw...[Includes one data chart]
The risk-sharing transactions that Fannie Mae and Freddie Mac started offering in 2013 have drawn some investors away from buying new jumbo mortgage-backed securities, according to industry participants. The government-sponsored enterprises say the deals that share credit risk with investors help reduce taxpayer risk. However, the returns and risk profile of Freddie’s Structured Agency Credit Risk deals and Fannie’s Connecticut Avenue Securities deals have caused some investors to abandon jumbo MBS and instead invest in the GSEs’ offerings. Aaron Pas, a senior vice president of non-agency portfolio management at American Capital Mortgage Investment, said...
Lenders are getting more comfortable with the Consumer Financial Protection Bureau’s ability-to-repay rule, according to industry participants. Loans that do not meet standards for qualified mortgages are only available in the non-agency market and most have been retained in portfolio to this point. Many lenders participating in a recent roundtable hosted by Standard & Poor’s said interest-only mortgages continue to be attractive products, even though the loans are non-QMs. “These loans have been originated post-crisis, and originators expect to continue lending to high-quality borrowers with substantial equity in their properties,” S&P said in a summary of the roundtable discussion. A large bank lender at the S&P roundtable said...
More investors would be willing to buy new non-agency mortgage-backed securities if loans in the deals had prepayment penalties, according to an industry analyst. The penalties offer investors protection, but their use has been limited by the Consumer Financial Protection Bureau’s ability-to-repay rule, among other factors. Lawrence White, a professor and deputy chair in economics at the New York University Stern School of Business, suggested that the non-agency MBS market would see increased demand from investors, particularly insurance companies, if loans in non-agency MBS included prepayment penalties. “These institutions have largely stayed...
Standards for qualified-residential mortgages along with risk-retention requirements for certain non-agency mortgage-backed securities take effect Dec. 24, 2015. The final rule establishing the implementation date was published in the Federal Register at the end of December 2014. Federal regulators first detailed...[Includes two briefs]
FHA borrowers who refinance through the agency’s Home Affordable Modification Program will also be eligible to earn $5,000 in the sixth year of their performing, modified loan, subject to the Department of the Treasury’s guidelines, the FHA has announced. The incentive to FHA-HAMP borrowers is one of several enhancements to the Making Home Affordable program that the Department of Housing and Urban Development and the Treasury Department unveiled in December last year. The enhancements were designed to motivate homeowners in MHA to continue making timely mortgage payments, strengthen the safety net for those still facing financial hardships, and help them build equity in their homes. Under the revised HAMP guidelines, all homeowners in the program become eligible to earn $5,000 in the sixth year of their loan modification. This means a borrower’s outstanding principal balance could ...
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