The Department of Housing and Urban Development has released a final rule defining a “qualified mortgage” that is insured by the FHA. The final rule will be effective on Jan. 10, 2014. The HUD rule builds off the QM/Ability-to-Repay rule, which the Consumer Financial Protection Bureau finalized earlier this year. The Dodd-Frank Act requires HUD to propose a QM definition that is aligned with the ability-to-repay criteria set out in the Truth in Lending Act and with the agency’s mission to ...

In the third quarter of 2013, the level of home-mortgage debt outstanding grew for the first time since early 2008 as the housing industry continued to climb out of the crater. The Federal Reserve this week announced there was $9.864 trillion of single-family mortgages outstanding at the end of September, a tiny 0.1 percent increase from the previous quarter. But after four and half years of decline, the gain seemed monumental. The central bank noted that all the increase was in first mortgages, while the supply of home-equity loans outstanding continued to shrink. Servicing attached to Ginnie Mae, Fannie Mae and Freddie Mac programs continued...[Includes one data chart]

Ability-to-repay requirements set by the Consumer Financial Protection Bureau could increase losses, liquidation timelines and loan modifications for non-agency MBS, according to Standard & Poor’s. The new requirements take effect Jan. 10 and include assignee liability for certain loans. Liability from the ATR requirements and qualified-mortgage standards are only a concern for non-agency MBS issuers and investors if a borrower defaults. Given the exceptionally strong performance of jumbo MBS issued since 2010, S&P said the threat of higher losses will generally be mild for jumbo MBS. However, performance could eventually decline...

Fannie Mae, Freddie Mac and Ginnie Mae still provide most of the funding for home loans originated in 2013, but the non-agency sector has been making a stealthy comeback, according to a new analysis and ranking by Inside Mortgage Finance. Conventional-conforming loan production declined by 24.5 percent from the second quarter of 2013 to the third quarter, dropping to an estimated $275.0 billion. Although that still accounted for 59.8 percent of total production for the period, it was the lowest quarterly volume in conventional-conforming lending since the third quarter of 2011. Government-insured lending continued...[Includes two data charts]

Originations of non-agency jumbo mortgages in the third quarter increased by 2.7 percent compared with the second quarter of 2013 while total originations fell by 18.6 percent, according to a new ranking by affiliated publication Inside Mortgage Finance. An estimated $77.0 billion in non-agency jumbos were originated in the third quarter, a level of originations not seen since the second quarter of 2007. The jumbo market accounted for 16.7 percent of total mortgage ... [Includes one data chart]

The annual loan limit announcement from the Federal Housing Finance Agency included mixed news for the non-agency market. The FHFA said both the conforming and high-cost loan limits for the government-sponsored enterprises will be unchanged for 2014. However, a reduction to the maximum loan sizes Fannie Mae and Freddie Mac can purchase is still under consideration. “Further information on potential future changes in the maximum size of loans that Fannie Mae and Freddie Mac guarantee will be ...

The jumbo mortgage-backed security market may be thawing slowly. Credit Suisse this week issued its first security since the end of August, and Redwood Trust issued its latest jumbo MBS this month after a similar pause in securitization activity. The $301.90 million deal by Credit Suisse received an AAA rating from DBRS and Standard & Poor’s with credit enhancement of 7.55 percent on the top-rated tranche. Mortgages in CSMC 2013-IVR5 seasoned for an average of four months and had an average interest rate ...

Non-agency lenders that plan to originate qualified mortgages suggest that one of their top concerns is meeting the debt-to-income ratio requirements. Only non-agency mortgages will have to have a back-end DTI ratio of 43 percent or below to be classified as qualified mortgages under the Consumer Financial Protection Bureau rule taking effect Jan 10. Average DTI ratios on mortgages in jumbo mortgage-backed securities are well below that limit – 34.0 percent on the latest deal from Redwood Trust ...

Due diligence can be a more significant factor in the rating of a jumbo mortgage-backed security than the representations and warranties on the deal, according to Kroll Bond Rating Agency. However, major investors in non-agency MBS have expressed concerns about due diligence on new deals along with the adequacy of disclosures. At a structured-finance investor conference hosted by KBRA this month, the rating service noted that it doesn’t adjust expected losses or credit enhancement for variations in ...

Jumbo conduits have made strong progress in controlling for risks from non-retail mortgages, according to Moody’s Investors Service. The rating services tend to view retail originations as the safest channel due to lower risk of fraud. While loans from brokers have traditionally performed worse than loans from other channels, jumbo conduits have implemented a number of measures to reduce fraud risk. “New Penn Financial, for example, contacts borrowers directly with well-scripted calls designed to ...