Questions from Inside Nonconforming Markets prompted the Consumer Financial Protection Bureau to acknowledge last week that its director misspoke during a speech at the Mortgage Bankers Association’s annual convention. In arguing that the CFPB’s ability-to-repay rule hasn’t caused a significant reduction in mortgage originations, Richard Cordray said last week that “most” jumbo loans are non-qualified mortgages. While comprehensive data on the non-QM share of jumbo mortgages is not available, a number of data sources suggest that most jumbos are in fact QMs, not non-QMs. Three of the five largest jumbo lenders told...

A typical jumbo mortgage-backed security is stronger in many ways than the non-agency MBS-like transaction Freddie Mac issued at the end of July, according to a recent analysis by Andrew Davidson & Co. However, the Freddie deal benefitted from a wrap provided by the government-sponsored enterprise. Freddie Mac Whole Loan Securities Trust Series 2015 SC01 was backed by mortgages with an unpaid principal balance of $302.96 million. The risk-sharing transaction was structured as a cash securitization with $278 million in senior certificates guaranteed by Freddie and approximately $23 million in unguaranteed subordinate certificates. Andrew Davidson compared...

A new research paper aims to settle the debate about whether loose underwriting or the downturn in home prices was the biggest factor in the poor performance of subprime mortgages originated before the financial crisis. There was a sharp divergence in the performance of subprime mortgages originated in 2003 and those originated in 2006 and 2007. Some have suggested that the subprime mortgages originated just before the crash defaulted at higher rates largely because underwriting standards on the loans deteriorated, while others claim the main issue was that house price declines left the borrowers with negative equity. A paper by Christopher Palmer, a professor of real estate at the University of California at Berkeley’s Haas School of Business, claims...

Citadel Loan Servicing, Irvine, CA, one of the most active nonprime residential lenders in the market, is on track to fund a company-record $400 million worth of mortgages this year, more than double what it produced last year. In a brief interview with Inside Nonconforming Markets this week, company founder and CEO Dan Perl said his goal for next year is $1 billion – all in loans that do not meet the qualified-mortgage standard. If the privately held Citadel – Perl is the chief shareholder – can hit...

The FHA has extended the period during which servicers must identify delinquent Home Equity Conversion Mortgage loans that have become due and payable or against which an initial legal action has been taken because they are no longer curable. In April, the FHA issued guidance that granted mortgagees 180 days, or until Oct. 23, 2015, to review their portfolios and bring defaulted HECM loans into compliance with the mandatory foreclosure timelines. On Oct. 16, the agency extended the timelines through Jan. 18, 2016. The initial guidance laid out loss mitigation options that HECM servicers may provide when property charges are not paid in accordance with the terms of the HECM loan. HECM loans that are subject to a repayment plan may continue as long as they remain current, said the FHA. Otherwise, lender/servicers must follow the requirements in the April guidance. The loss mitigation options are not available ...

New research from FICO suggests that broader economic conditions have helped limit losses on home-equity lines of credit originated before the financial crisis. For years, analysts have warned about the risks posed by HELOCs after the loans hit 10-year reset periods, prompting payment shock for some borrowers as principal and interest is due as opposed to the interest-only payments that were initially allowed. The risk to banks is seen as particularly harsh because ...

While lenders scramble to adapt to the Consumer Financial Protection Bureau’s integrated disclosure rule, the agency has released its long-awaited final rule under the Home Mortgage Disclosure Act, ratcheting up the industry’s data-reporting requirements – and the potential for more fair lending enforcement activity. Among the most significant changes within the 800-page regulation, the final rule modifies which institutions are subject to Regulation C and adopts a uniform loan volume threshold for depository and non-depository institutions. It excludes from institutional coverage firms that did not originate at least 25 closed-end mortgage loans in each of the two preceding calendar years or at least 100 open-end lines of credit in such a time period. The new rule also changes...

Conventional conforming loans accounted for 60.3 percent of the 2014 mortgage market, according to an Inside Mortgage Finance analysis of 2014 Home Mortgage Disclosure Act data. Wells Fargo was the top HMDA lender last year with a 7.9 percent share of the market. HMDA originations include only retail and table-funded broker production and do not include correspondent acquisitions. Wells was the top conventional-conforming lender and the biggest jumbo producer. Quicken Loans was...[Includes one data table]

The non-agency MBS market sputtered to its weakest new issuance volume in a year during the third quarter of 2015, according to a new market analysis and ranking by Inside MBS & ABS. A total of $9.43 billion of non-agency MBS were issued during the third quarter, down 39.7 percent from the second quarter. Thanks to a strong start in the first half of 2015 – and weak new issuance during the same time last year – year-to-date production was up 47.5 percent from the first nine months of 2014. The two mainstays that have been propping up non-agency MBS issuance have been...[Includes two data tables]

Returns on non-agency structured finance products declined in the third quarter of 2015 compared with the previous quarter, according to industry analysts. The shift appears to be due to macro issues as opposed to declining underwriting or performance. “The third quarter wasn’t a particularly happy quarter for non-agencies, with brakes on issuance and pullback in returns,” analysts at Bank of America Merrill Lynch said in a new report. “The latter half of the third quarter was characterized...