Bank of America won a favorable ruling this week on its proposed $8.5 billion settlement with a group of non-agency mortgage-backed securities investors. With the settlement likely to be decided in state court, analysts suggest that the deal will serve as a model for other non-agency MBS disputes. Baupost Group, a distressed debt fund that has challenged the settlement under the name “Walnut Place,” succeeded in October in having the settlement moved to federal court. However, the Second Circuit Court of Appeals determined this week that the settlement should be overseen by the Manhattan State Supreme Court ...

With the economics of non-agency securitization uncertain, Redwood Trust announced this week that it is considering bulk sales of newly originated non-agency jumbo loans in lieu of securitization. The real estate investment trust said it plans to issue four to six mortgage-backed securities this year – including the one completed in January – depending on whether the REIT sells a portion of its whole loans on a bulk basis. The business decision to either securitize or sell whole loans will be based on balancing ...

Fannie Mae and Freddie Mac could be used to help establish a functioning non-agency market, according to a strategic plan released last week by the Federal Housing Finance Agency. The conservator of the government-sponsored enterprises said it is working on various initiatives to gradually reduce the GSEs’ roles in housing finance. “The strategic goals and performance objectives set forth here provide an outline for the next chapter of the story, one that focuses in earnest on building a secondary mortgage market infrastructure that will live beyond the enterprises,” said Edward DeMarco, acting director of the FHFA, in testimony this week before the Senate Committee on Banking, Housing, and Urban Affairs ...

The largest private-owned nonbank mortgage company is trying to launch an initial public offering for an affiliated business that will use the capital to amass an investment portfolio in non-agency jumbo mortgages. Provident Mortgage Capital Associates was created by Provident Funding Associates, a privately held mortgage banker that ranked 12th in loan originations in 2011, the second largest nonbank lender in the industry. While PFA will remain privately held, it will manage operations at the publicly traded PMCA and ...

At least five firms revealed recently that their non-agency mortgage-backed security activity is under investigation by the Securities and Exchange Commission and/or the Department of Justice. The firms are Ally Financial, Citigroup, Goldman Sachs, JPMorgan Chase and Wells Fargo. The companies revealed little about the topic of the investigations, though some are related to mortgage securitization and disclosures while others relate to potential origination or underwriting fraud ... [Includes four briefs]

Increased mortgage insurance premiums combined with hefty penalties assessed on lenders will generate additional revenue that may keep the FHA mortgage insurance program afloat. Nevertheless, the price for keeping the fund solvent will make fewer borrowers qualified for an FHA loan, according to lenders. Lenders say the upfront mortgage insurance premium increase will have little effect on borrowers because the charge can be rolled into the loan amount. Changes to the annual MIP, however, will decrease FHA business in general because the cost of the annual MIP will have to be included in the ...

Ginnie Mae will publish, in advance, the CUSIP and pool information for multiple issuer pools (MIP) on its website for the current month, plus the upcoming three months of issuance. The information will be published by pool term, pool type and security interest rate. This enhancement applies to all securities with an April 1, 2012, issue date and thereafter. According to Ginnie Mae, publishing the CUSIP and pool numbers will improve issuers’ ability to manage their loan pipelines and MIP loan package submissions before the pool is finalized. Both the finalized CUSIP and pool numbers as well as the future CUSIP and pool numbers for MIPs will be ...

The volume of Home Equity Conversion Mortgage loans continued to drop both on quarterly and yearly bases while the overall FHA market ended January 2012 on a weaker note compared to the same month last year. HECM production fell 11.0 percent in 2011 from the previous year to $16.9 billion and off 20.6 percent from the third to the fourth quarter. Sponsors as a share of lender originations accounted for 40.7 percent of new HECM loans originated over the 12-month period. Initial principal amount at origination totaled $10.9 billion. Wells Fargo Bank ended the year as ... (with 2 charts)

The U.S. Court of Appeals for the Second Circuit is apparently on the verge of deciding in which jurisdiction the pending $8.5 billion Bank of America/Countrywide residential MBS representations and warranties settlement with Bank of New York Mellon and investors will be finalized. The final outcome is expected to influence similar disputes involving other large mortgage originators, but probably on a smaller scale. Last week, the appeals court held a hearing to determine if the case should be moved back to New York state court, which would accelerate a conclusion of the settlement. “A final decision from...

Activity in the Home Affordable Modification Program’s Principal Reduction Alternative is heavily concentrated, according to an analysis by Inside Nonconforming Markets. Bank of America and Wells Fargo combined account for 51.4 percent of the non-agency principal reduction mods, based on new disclosures by the Treasury Department. The servicers’ PRA activity is outsized even compared with their overall non-agency HAMP activity. BofA and Wells combined account for 33.6 percent of active non-agency HAMP mods ... [Includes one data chart]