Bank of America’s proposed $8.5 billion settlement with non-agency mortgage-backed security investors was officially moved to federal court this week. The change of venue from state court – requested by a group of investors known as Walnut Place – will likely lengthen the amount of time it takes the settlement to close and could lead to the settlement being renegotiated with better terms for investors. ... [includes six briefs]

Despite low mortgage rates and home prices, significant barriers still stand in the way of a potential first-time homebuyer. A new tax-preferred mechanism for downpayment savings could work towards lowering these barriers, with the added benefit of incentivizing saving habits, according to a policy brief from the Progressive Policy Institute. The “HomeK” account would be carved out of savings mechanisms such as individual retirement accounts and 401(k) accounts allowing a person to separate up to 50 percent of employee contributions into a sub-account. Account-holders could then disburse their money to make a...

The improvements that the Federal Housing Finance Agency is expected to make to the government’s Home Affordable Refinance Program will likely come at the expense of MBS investors, say experts. The outlines of an expanded HARP are far from clear, but the FHFA is said to be giving serious consideration to lifting the 125 percent loan-to-value limit, in addition to waiving loan-level pricing adjustments, representation and warranties imposed on lenders, valuation requirements and the portability of mortgage insurance. The agency, which oversees Fannie Mae and Freddie Mac, is expected to make an...

Investors in non-agency mortgage-backed securities would rather not fight in court to enforce buybacks, according to Talcott Franklin, shareholder of his namesake law firm. However, Franklin said litigation has been necessary because servicers – largely those affiliated with lenders or MBS issuers – have not done enough to prevent losses. “If the banks can get it together on the servicing side and try to reduce these losses, that is going to be the best way for them to proactively reduce these [buyback] risks,” he said this week during a webinar hosted by Inside Mortgage Finance Publications. ...

The servicing compensation structure for non-agency mortgages must be reformed, according to Federal Reserve Governor Sarah Bloom Raskin. The Federal Housing Finance Agency noted that the options it proposed for agency mortgages last week could also serve as a model for non-agency mortgages and could help revive the sector. “It is imperative to reconsider the compensation structure so that servicers have adequate incentives to perform payment processing efficiently on performing mortgages, and to perform effective loss mitigation on delinquent loans,” Raskin said in a speech this week. ...

Lenders looking to participate in Redwood Trust’s jumbo securitization efforts must meet high standards, according to a review of the real estate investment trust’s new jumbo mortgage-backed security. The major originators in the $375.2 million jumbo MBS Redwood issued last week were all considered “above average” by Fitch Ratings. Redwood has invested significant resources into its jumbo conduit and correspondent program in an effort to revive non-agency securitization. ...

Lenders and consumer advocates are bitterly divided over rules for alternative mortgages released by the Consumer Financial Protection Bureau in July. While lenders generally support the preemption in the interim final rule, the Center for Responsible Lending raised major concerns about the rule and the “spread of the subprime virus.” The CFPB’s interim final rule on the Alternative Mortgage Transaction Parity Act was required by the Dodd-Frank Act. ...

Alt A mortgages and interest-only loans held by Freddie Mac will be subject to new buyback reviews due to issues with the government-sponsored enterprise’s settlement with Bank of America. An audit released last week suggests that the GSE lost billions of dollars by failing to include thousands of alternative mortgages in the buyback analysis. The Federal Housing Finance Agency’s Office of Inspector General conducted the audit and – at the request of the FHFA and Freddie – redacted the exact amount of money potentially “left on the table.” ...

Use of principal reduction in loan modifications increased in the second quarter of 2011, according to the Office of the Comptroller of the Currency. Principal reduction has gained popularity for non-agency mortgages after initially being used almost exclusively on portfolio loans. Some 8,645 principal reduction mods were completed by major banks and thrifts in the second quarter of 2011, according to the OCC. Non-agency mortgages accounted for 48.9 percent of all principal reduction mods in the second quarter of 2011, with portfolio mortgages accounting for the rest of the activity. ...

Holdings of home-equity loans by banks and thrifts fell by 1.9 percent in the second quarter of 2011 compared with the previous quarter, according to the Inside Mortgage Finance Bank Mortgage Database. Delinquencies on the loans remain low but banks are being subject to greater regulatory scrutiny regarding their treatment of HELs. Banks and thrifts held $1.23 trillion in HELs at the end of the second quarter of 2011. The serious delinquency rate on the loans was 2.04 percent, down from 2.09 percent the previous quarter. ... [Includes one data chart]