A moratorium of real estate investment trusts gaining membership in the Federal Home Loan Bank system ended recently when the captive insurer of Five Oaks Investment was approved as a member of the FHLBank of Indianapolis. The REIT revealed this week that Five Oaks Insurance gained FHLBank membership on Feb. 24. “FOI is currently negotiating agreements for advances with the FHLBank and, although no assurance can be given, FOI anticipates ...

The two main types of representation-and-warranty frameworks used in jumbo mortgage-backed securities can both effectively protect investors, according to Moody’s Investors Service. Each framework presents different risks, and industry participants suggest that other aspects of deals carry more importance for investors. Jumbo MBS issued in recent years have largely included either an open-ended rep-and-warrant framework or a prescriptive framework ...

Security issuances backed by FHA and VA loans totaled $267.6 billion in 2014, with several large states accounting for a significant share of FHA/VA originations. An estimated $158.1 billion of FHA-insured loans, including modified loans, were securitized last year, with purchase home loans comprising most of the transactions. Approximately $30.0 billion of FHA refinance loans were securitized as well. The FHA MBS had an average loan-to-value ratio of 92.3 percent and a debt-to-income ratio of 40.1 percent. The average FICO score was 672.3, which was indicative of first-time homebuyers and borrowers with slightly tainted credit. First-ranked California, Texas (#2) and Florida (#3) combined for a total of $48.0 billion, which represented 30.3 percent of FHA loans in Ginnie Mae mortgage-backed securities in 2014. Fourth-ranked New York reported a total of $6.7 billion while ... [ 2 charts]

Consumer advocates and attorneys are urging the Department of Housing and Urban Development to delay the implementation of a new policy that purports to provide relief to surviving spouses of reverse-mortgage borrowers and to find solutions that are more effective. The group said the policy HUD announced in Mortgagee Letter 2015-03 on Jan. 29 is so restrictive that virtually all surviving non-borrowing spouses will get no relief. A letter to the agency, drafted by the National Consumer Law Center and signed by the Consumers Union, California Reinvestment Coalition, National Housing Law Project, Housing and Economic Rights Advocates and Institute on Aging denounced the new policy. They said most surviving spouses of deceased borrowers of Home Equity Conversion Mortgage loans will not be able to meet the policy’s stringent guidelines and will ...

The representations and warranties used in jumbo MBS can sufficiently handle some breaches but fail to completely protect investors, according to Moody’s Investors Service. In a report released this week, the rating service noted that issuers use two main varieties of reps and warrants: those that allow for an open-ended review of loans and those that employ a prescriptive framework. The open-ended reviews are seen in jumbo MBS from Redwood Trust, WinWater Home Mortgage and others...

Banks have retained a significant volume of newly originated jumbo mortgages and even certain conforming loans in recent years, but analysts at Deutsche Bank Securities stress that the “conventional wisdom” regarding bank demand for MBS is wrong. “Despite anecdotal evidence of banks retaining more whole loans – they are more and more reliant on MBS as a percentage of their overall exposure to residential mortgages than they have been at any point in the past 15 years,” the analysts said in a report released last week. Bank demand for MBS holdings has increased...

Jumbo mortgage production last year grew its share of total originations to its highest level since well before the financial collapse that launched the era of the “agency jumbo” loan. Mortgage lenders cranked out a total of $291.1 billion of home mortgages with loan balances exceeding the old conforming loan limit of $417,000. Like everything else in mortgages, jumbo production was down from 2013, by 22.4 percent. But total mortgage originations fell...[Includes three data charts]

JPMorgan Chase is shifting its mortgage production focus away from agency loans toward the jumbo market. “Our focus is on maximizing our share of high-quality originations,” Kevin Watters, CEO of mortgage banking at Chase, said last week during the bank’s annual investor presentation. He provided a slide showing Chase’s market share in terms of total originations, conventional mortgages, government mortgages and jumbo loans. As measured from ...

With the ink still wet on a $2.6 billion settlement agreement reached in principle with the Department of Justice late last month, Morgan Stanley is apparently in discussion with New York Attorney General Eric Schneiderman to avert another potential MBS lawsuit. In a recent regulatory filing, the investment bank disclosed that the New York AG Office, also a member of the presidential RMBS Working Group that brought the previous MBS lawsuit against the firm, indicated its intention to file a similar lawsuit. The lawsuit is related to approximately 30 subprime securitizations sponsored by Morgan, the AG wrote in a Jan. 13 notice to the bank. The suit would allege...

One popular strategy among investors trying to profit from the woes of Ocwen Financial is to purchase subprime MBS tranches being serviced by the company and then declare a “material breach” in its servicing covenants. Speculators have been doing this while selling short Ocwen’s stock. According to analysts and investors familiar with the strategy – which is being employed by a fund called BlueMountain (and others) – subprime tranches can be bought at deep discounts. A material breach can occur when a rating agency downgrades the servicer, in this case Ocwen. For several weeks in January and February when Ocwen’s shares were plunging to new lows, it appeared...