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]

Issuers of jumbo mortgage-backed securities have been cagey about identifying the smaller lenders that have contributed mortgages to jumbo MBS. However, Inside Nonconforming Markets has uncovered 93 lenders that participated in deals issued in the first quarter of 2014. The lenders whose loans were included in jumbo MBS in the first quarter were largely small firms that don’t attract much attention. Most of the lenders participating in jumbo MBS ... [Includes two data charts]

Officials at Hatteras Financial revealed this week that the real estate investment trust plans to purchase jumbo adjustable-rate mortgages from lenders, branching out from a focus on investing in agency mortgage-backed securities. Hatteras recently established a flow program to purchase agency ARMs from 10 lenders. Michael Hough, the REIT’s CEO, said the program offers lenders an alternative to selling ARMs to the government-sponsored enterprises and ...

Kroll Bond Rating Agency, one of the most commonly used rating services for jumbo mortgage-backed securities in recent years, released its criteria this week for jumbo MBS that include mortgages subject to the Consumer Financial Protection Bureau’s ability to repay rule. The criteria from KBRA is similar to criteria from the other rating services, with higher credit enhancement requirements for certain loans that don’t meet the CFPB’s standards for qualified mortgages ...

The FHA will allow lenders to suspend foreclosures on properties backed by Home Equity Conversion Mortgage loans for up to 60 days to help non-borrowing spouses of deceased HECM borrowers temporarily avoid eviction and, possibly, foreclosure. The announcement of the policy came as a federal district court judge for the District of Columbia considered whether to certify a class-action case filed by four surviving spouses of HECM borrowers last month. The lawsuit alleges that HUD had failed to protect them from being displaced from their homes – the same protection HECM regulations extend to reverse mortgage borrowers. The suit accuses the department of violating the federal Administrative Procedures Act by promulgating contradictory regulations without public comment. Last September, a DC judge found HUD in violation of federal law in a similar case and ordered that the case ...

The sputtering non-agency MBS market generated just $2.59 billion in new issuance during the first three months of 2014, one of the lowest quarterly marks since the market imploded in late 2007. New issuance in the first quarter was down 44.1 percent from the already-weak level in the fourth quarter of 2013, and it was off 65.6 percent from the same period a year ago. There was...[Includes two data charts]

Issuance of residential MBS from foreign countries aimed at investors in the U.S. dwindled in 2013 after a few years when it surpassed new issuance of domestic jumbo deals. Activity in the market for U.S. dollar-denominated foreign MBS has picked up somewhat this year due to issuance out of Australia. Some $1.63 billion in U.S. dollar-denominated foreign residential MBS was issued in 2013, according to the Securities Industry and Financial Markets Association, a significant decline from the $10.70 billion in such issuance in 2012. The market for foreign residential MBS aimed at U.S. investors has been strong since the end of 2009, with $21.10 billion in such issuance in 2010 and $32.68 billion in issuance in 2011. After the financial crisis, issuance of U.S. dollar-denominated foreign MBS outpaced...

The jumbo mortgage-backed security market has yet to recover from the spike in interest rates seen nearly a year ago. Investor demand for the securities remains weak, even with the pristine performance of jumbo MBS issued since 2010. Four deals were priced in the first quarter of 2014 for a total of $1.29 billion in issuance, according to Inside Nonconforming Markets. While that was a 56.0 percent increase in issuance compared with ... [Includes two data charts]

A number of real estate investment trusts and other nonbanks plan to invest in nonprime assets other than vintage non-agency mortgage-backed securities as part of an effort to take credit risk as opposed to interest rate risk. The plans include investments in credit-sensitive loans, seller financing for lenders that work with nonprime borrowers and, potentially, even direct nonprime lending. A year ago, Two Harbors Investment saw an opportunity in what it calls credit-sensitive loans ...