After including a significant amount of ARMs in its first deal of 2013, Redwood Trust relied largely on 30-year fixed-rate mortgages for its second non-agency jumbo mortgage-backed security of the year, according to presale reports released this week. The $666.13 million Sequoia Mortgage Trust 2013-2 is set to receive a triple-A rating with characteristics largely similar to other recent issuance from the real estate investment trust. While ARMs accounted for 21.0 percent of the dollar volume of SEMT 2013-1 ...

New rules from the Consumer Financial Protection Bureau require servicers to consult with loan owners regarding the loss mitigation process and increase reporting of loss mitigation activity. Senior officials at the CFPB said they have received complaints that servicers are not offering loan modification options allowed by loan owners, including non-agency mortgage-backed security investors. A senior CFPB official said servicers do not always have strong incentives to offer ...

Arch Bay Capital, once one of the most active buyers of nonperforming residential loans, has sold most of its NPL portfolio and is launching a company that will originate non-agency mortgages, according to industry officials who have been briefed on the plans. One source who has done business with Arch Bay told Inside Nonconforming Markets that the working name of the lending unit under construction is 5 Arch. The company, based in Irvine, CA, “seems to be expanding at a good pace” according to the source ...

The already deflated subprime market will likely stay depressed due to the Consumer Financial Protection Bureau’s new ability-to-repay rule, according to industry analysts. The rule singled out higher-priced mortgage originations, offering such loans fewer protections than similar prime mortgages in the form of a rebuttable presumption instead of a safe harbor from litigation. “Not many rebuttable-presumption loans will be made by lenders, and they will carry higher rates due to the ...

Loan originator compensation requirements released this week by the Consumer Financial Protection Bureau aim to prohibit steering to subprime mortgages. The CFPB noted that during the subprime boom, some borrowers who would have qualified for prime loans were steered into subprime loans, with the steering largely tied to LO compensation. “Before the financial crisis, many mortgage borrowers were steered towards risky and high-cost loans because it meant more money for the loan originator,” said Richard Cordray ...

Federal regulators approved a final rule last week to set new appraisal requirements for higher-priced mortgage loans. The requirements include a complete exemption for “qualified mortgages” and certain other originations. Comptroller of the Currency Thomas Curry said the rule, along with the CFPB’s recent ability-to-repay rule, are key components in addressing the “worst economic practices since the Great Depression.” The final rule requires lenders originating HPMLs to obtain ...

Six months after non-agency servicers were able to offer expanded loan modification options under the Home Affordable Modification Program, only 331 of such “Tier 2” mods had been completed, according to the Treasury Department. Industry analysts suggest that HAMP will fall well short of the Treasury’s volume goals when the program expires at the end of this year, possibly due to noncompliance by servicers. HAMP Tier 2 was announced in January and effective June 1, though not all non-agency HAMP servicers ...

The Federal Housing Finance Agency and General Electric this week settled a lawsuit filed by the FHFA in 2011 regarding $549.0 million in non-agency mortgage-backed securities purchased by Freddie Mac. The settlement is the first on the FHFA’s 18 pending non-agency MBS lawsuits. The terms of the settlement were not disclosed. Residential Capital agreed to pay $297.6 million to Fannie Mae this week, prompting the government-sponsored enterprise to drop its objection to ResCap ... [Includes four briefs]

Mortgage bankers funded $232.69 billion worth of FHA loans in 2012, a 22 percent jump from the year prior, but the improvement pales in comparison to business gains experienced by Fannie Mae and Freddie Mac, according to exclusive loan-level data compiled by Inside FHA Lending. By comparison, Fannie grew its business by almost 46 percent last year with Freddie improving loan purchases from seller/servicers by 49 percent. Still, it was FHA’s best quarterly showing ($64.03 billion) since the fourth quarter of 2010 when mortgage lenders originated $72.12 billion of product. And not surprisingly, consumers taking out FHA loans ... [2 charts]

Poor oversight and monitoring have allowed certain borrowers with Home Equity Conversion Mortgage loans to illegally rent their properties to participants in the federal government’s Section 8 housing choice voucher program, according to the Department of Housing and Urban Development’s Office of the Inspector General (OIG). The second of two OIG audit reports on HUD’s oversight of the HECM program has concluded that department policies did not always ensure that borrowers complied with the program’s residency requirements. The audit found that 37 out of 174 HECM borrowers reviewed were ...