The sphere of mortgage lending that will exist outside the parameters of the qualified-mortgage standard established by the Consumer Financial Protection Bureau represents an attractive opportunity for both lenders and bond buyers, but skittish investors need to be won back before they return and participate to any significant degree. That was one of the key take-aways from a webinar sponsored this week by Inside Mortgage Finance, an affiliated publication. Non-QM mortgages will exist...

Over the past 10 days, MBS prices have risen by roughly 50 basis points. Since early April, prices have jumped 150 basis points, based on the Fannie Mae 4s, catching market participants off guard. Joe Farr, director of sales for MBSQuoteline, noted, “The expectation was that everyone thought bond prices would fall.” But it hasn’t turned out that way, even with the Federal Reserve continuing to taper its investment in MBS. The problem in the MBS market continues...

The retained mortgage portfolios of Fannie Mae and Freddie Mac continued to decline through attrition during the first quarter of 2014 as the two government-sponsored enterprises reported some $9.3 billion in profit, due largely to non-agency MBS legal settlements. The two GSEs held a combined mortgage-investment portfolio of $902.1 billion at the end of March, down 5.2 percent from the previous quarter. The biggest decline was in MBS holdings, down 7.3 percent, including an 8.3 percent drop in Fannie’s and Freddie’s holdings of their own MBS. Wall Street investment bankers and non-agency MBS issuers paid...[Includes one data chart]

Issuers of jumbo mortgage-backed securities could increase their activity in the second quarter of 2014 after two consecutive quarters of suppressed issuance. Pricing for new jumbo MBS has improved, according to industry participants, though many expect issuance to remain constrained. In April, Redwood Trust issued a $346.30 million jumbo MBS that priced at the end of the first quarter. At the end of April, Credit Suisse issued a $271.73 million jumbo MBS, according to rating reports ...

In the fourth quarter of 2013, Redwood Trust launched its program to acquire mortgages to be sold to the government-sponsored enterprises. The real estate investment trust’s GSE conduit activity is now poised to overtake the jumbo activity that Redwood has been known for in recent years. Redwood acquired $1.09 billion in residential mortgages in the first quarter of 2014, with jumbos accounting for 72.6 percent of the activity. Officials said the real estate investment trust’s goal is to ...

While originating loans that do not meet qualified-mortgage standards does pose litigation risk, many of the lenders willing to offer the loans to prime borrowers have established underwriting standards that minimize the risks while participating in a sector with less competition than the agency market. Mitch Hochberg, general counsel at Ethos Lending and a partner at Fenway Summer, estimated that non-QMs would account for at least 12.5 percent of originations in 2014, assuming a ...

Holdings of home-equity loans by banks and thrifts continued to decline at the end of 2013, according to a new ranking and analysis by Inside Nonconforming Markets. However, HEL originations are starting to increase as home prices have recovered in recent years. Banks and thrifts held $1.02 trillion in closed-end second liens, home-equity lines of credit and HELOC commitments at the end of the fourth quarter of 2013. The holdings declined by ... [Includes one data chart]

Radian Group announced this week that it plans to acquire Clayton Holdings for $305 million. Among other services, Clayton provides due diligence on non-agency mortgage-backed securities. Radian said the transaction is expected to close this summer and the firm expects to break even on the purchase this year. Radian said Clayton will continue to serve its existing clients, grow in its current operations areas and explore opportunities to market new ... [Includes eight briefs]

Servicer-advance rates on vintage non-agency MBS have been up and down in recent quarters, showing further variances based on the servicer and issuer. The fluctuations have made it difficult to project valuations for certain securities, but industry analysts suggest that as mortgage performance continues to improve, servicer-advance rates will stabilize. The rate at which servicers advanced missed borrower payments on mortgages in non-agency MBS decreased slightly on a quarterly basis in the first quarter of 2014 after a gain the previous quarter, according to Fitch Ratings. Pooling and servicing agreements for non-agency MBS require servicers to continue making advance payments until the payments are deemed non-recoverable. Non-agency MBS values are...

A number of underwriting characteristics for jumbo mortgages included in non-agency mortgage-backed securities shifted in the first quarter of 2014, according to an analysis by Inside Nonconforming Markets. And the decline in jumbo MBS activity during the quarter has prompted industry analysts to significantly reduce projections for issuance the rest of this year. Average credit scores declined, debt-to-income ratios increased and ... [Includes one data chart]