Reforms seen in the new era of non-agency jumbo MBS issuance arent enough to prompt significant investor participation, according to John Gidman, president of the Association of Institutional Investors. At a hearing this week by the Senate Committee on Banking, Housing and Urban Affairs, Gidman and others called for a number of changes to the non-agency market. The fundamental structural and process weaknesses for non-agency residential MBS securitization have not been fixed in the current private-label securities market, Gidman said. The issuance process itself is very opaque. Ratings continue to be shopped, issuers are still incentivized to water down representations and warranties, and continued variability in structures and documentation make the market more challenging for investors and raise the costs of funding. He acknowledged...
Issuance from new participants in the non-agency jumbo mortgage-backed security market wasnt enough to offset reduced activity by Redwood Trust and others in the third quarter of 2013, according to a new ranking and analysis by Inside Nonconforming Markets. Issuance of jumbo MBS slowed particularly in September, as Shellpoint Partners delayed its planned security and PennyMac Corp. made changes to attract investors. A total of $3.94 billion in non-agency jumbo MBS was issued in the third quarter, a 9.1 percent decline from the previous quarter and about level with the issuance seen in the first three months of 2013. Redwood and Credit Suisse, the jumbo MBS sectors two biggest players, slowed...[Includes one data chart]
Jumbo mortgage-backed security structures used by Redwood Trust, PennyMac Corp., and others pose risks for investors, according to Moodys Investors Service, although the rating service said bonds will only incur losses in low-probability scenarios. Moodys raised concerns about features that go beyond the simple senior-subordinate structures that have been most common since the restart of the non-agency MBS market. Those features include...
While the Consumer Financial Protection Bureau has encouraged originations of non-qualified mortgages, industry analysts predict that such originations will begin slowly. Even before the QM and risk-retention requirements are implemented for non-qualified residential mortgages, few lenders have been willing to offer subprime mortgages. Originations of subprime mortgages will likely be non-QMs due to the higher interestrates required for subprime borrowers. According to a survey completed by Zillow, borrowers with credit scores under 620 who requested a quote for a 30-year fixed-rate mortgage were...
Higher-priced mortgages accounted for a scant 1.0 percent of loan sales in 2012, according to an Inside Nonconforming Markets analysis of data from the Home Mortgage Disclosure Act. Originations of higher-priced mortgages increased slightly compared with 2011 but the growth didnt keep up with the increase in overall originations. Higher-priced first liens have an annual percentage rate at least 1.5 percentage points above the average prime offer rate. Federal regulators use the metric as a proxy for subprime mortgages. Some $15.80 billion in higher-priced mortgages were sold...[Includes one data chart]
The Department of Housing and Urban Development this week proposed its own qualified mortgage rule for FHA-insured mortgage loans that builds off the existing QM rule finalized by the Consumer Financial Protection Bureau earlier this year. The proposed rule aligns with the ability-to-repay criteria in the Truth in Lending Act as required by the Dodd-Frank Act. Once the proposal becomes final and takes effect, it would replace the CFPBs rule for FHA loans. The DFA has set a seven-year timetable for FHA, the VA and the Rural Housing Service to promulgate their own QM rules. HUDs proposed QM rule would ...
Overall FHA production saw little change in the second quarter of 2013 from the previous quarter, with the fixed-rate, 30-year product, refinances and jumbos weakening somewhat during the period, according to Inside FHA Lendings analysis of FHA data. FHA endorsements dropped 0.7 percent to $63.2 billion from $63.7 billion on a quarter-to-quarter basis. It is also the second time the numbers have slipped since the fourth quarter, when new endorsements totaled $64.0 billion. During the quarter, the top FHA lenders saw their total production drop by ... [2 charts]
The home-equity market has been down so long it doesnt take much to make it look like its looking up. Firming house prices in 2013 may be leading to a revival. The outstanding balance of home-equity loans, including home-equity lines of credit and closed-end second mortgages, continued to decline during the second quarter, dropping another 2.3 percent, according to the Federal Reserve. Since the end of 2007, the home-equity market has shrunk by 35.5 percent. Depository institutions hold...[Includes three data charts]
Moodys Investors Service this week warned of increasing complexity in the structures of new jumbo MBS. However, losses on the deals will only occur in low probability scenarios and issuers have yet to bring back all of the non-agency MBS features seen before the financial crisis. Moodys said complex cash-flow structures in new jumbo MBS can increase risks on senior bonds in the event of high mortgage losses. The features include super-senior support bonds, exchangeable securities, principal-only bonds, and pool interest-only bonds. These securities pose...
Rising prices for mortgage servicing rights in the second quarter of 2013 helped lure sellers to a market that continues to see a decline in available product and improving fundamentals. The Federal Reserve this week reported that the long, steady decline in home mortgage debt outstanding a streak that has now run six and a half years continued through the midway point in 2013. As of the end of June, home mortgage debt outstanding was down to $9.833 trillion, a 0.4 percent drop from March and a hefty 12.9 percent decline from the all-time high ($11.287 trillion) set back in March 2008. A new Inside Mortgage Finance analysis reveals...[Includes two data charts]