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]

Non-agency mortgage-backed security investors appear to be unwilling to support new non-agency MBS issuance until reforms are implemented for second-liens. Nancy Mueller Handal, a managing director at MetLife, said potential non-agency investors are looking for an alignment of issuer, investor and servicer interests. "A big piece of this comes down to the fact that servicers have been managing their second liens in portfolio to the detriment of the first lien," she said at a discussion this week hosted by the American Securitization Forum. Second liens became a major focus of a hearing on national servicing standards last week at...

Non-prime mortgages owned or guaranteed by Fannie Mae and Freddie Mac continued to gradually melt away in early 2011, although performance improved somewhat on Alt A mortgages. Combined, Fannie and Freddie had $447.33 billion in non-prime holdings at the end of the first quarter, down 17.3 percent from the same period in 2010, according to a new analysis by Inside Nonconforming Markets. Alt A mortgages accounted for 69.9 percent of the government-sponsored enterprises' exposure to non-prime loans. New business at the GSEs continued to meet high standards. The weighted-average loan-to-value ratio on mortgages guaranteed by... [Includes one data chart]

New due-diligence rules will likely result in increased costs for issuers of non-agency mortgage-backed securities and increased disclosures for investors. Due diligence firms are also divided on whether to assume the "expert liability" required by the Securities and Exchange Commission regarding due diligence performed on MBS. Vicki Beal, a senior vice president at Clayton Holdings, said Clayton – a leading MBS due diligence provider – would likely be willing to take on the expert liability requirements. However, she said Clayton’s assumption of the liability would require MBS issuers to pay more for Clayton's services. The SEC issued...

Industry participants warn that federal regulators' recently proposed definition for qualified residential mortgages is too stringent and will unnecessarily limit lending to prime jumbo borrowers. If the rule is adopted as proposed, many warn that issuance of non-agency mortgage-backed securities will be limited or non-existent. "While the rules do a good job of addressing and deterring abuses of subprime securitization structures, they are overly and unnecessarily harsh when applied to prime securitization structures," said Martin Hughes, president and CEO of Redwood Trust. Chris Flanagan, a managing director at Bank of America Merrill Lynch, added that...

High-touch servicer Nationstar Mortgage announced this week that it plans to raise up to $400.0 million via an initial public offering. The servicer - owned by Fortress Investment Group - primarily focuses on defaulted agency mortgages. Nationstar serviced a $64.2 billion portfolio as of the end of 2010, with subprime mortgages accounting for a 14.6 percent share. Reps. Gary Miller, R-CA and Brad Sherman, D-CA, recently introduced legislation to permanently increase the conforming loan limits. Few analysts believe that H.R. 1754, "the Preserving Equal Access to Mortgage Finance Programs Act," will gain much traction considering...