Nancy Handal, managing director of insurance conglomerate MetLife, oversees a $70 billion fixed-income portfolio and a $6 billion “high-yield” residential MBS opportunity fund – but has bought into just one jumbo MBS deal over the past few years. And she’s not shy about the reasons why: it’s all about disclosures. Handal is not happy about what non-agency issuers disclose and in particular she’s dismayed that MBS investors are essentially frozen out of the due-diligence process. Speaking at a housing forum sponsored by the Urban Institute and CoreLogic this week, the MetLife executive expressed...

Although non-agency MBS issuance has been a dicey proposition since rates spiked in late spring, residential lenders continue to eye the sector, liking the long-term outlook for jumbo securities. Two nonbanks taking a close look at the jumbo MBS market include Freedom Mortgage and W.J. Bradley Mortgage Capital, both established names in the agency MBS arena. In an interview with Inside MBS & ABS, Freedom Mortgage CEO and founder Stanley Middleman said...

Six months back, CoreLogic was bullish on the outlook for due-diligence work tied to jumbo securitizations. But earlier this month, the publicly-traded mortgage vendor shuttered its due-diligence unit, giving layoff notices to almost 70 workers. Another 40 or so full-timers will likely lose their positions in the next few months as the division winds down. Although the firm declined to discuss the reasons behind the pullout, competitors say the anticipated boom in jumbo securitizations hit a brick wall in the spring when rates spiked and investors began to shy away from the AAA pieces of those securities. In other words, the sour short-term outlook for due-diligence firms scouring for work on non-agency loans is resulting...

Fannie Mae and Freddie Mac picked the low-hanging fruit first and sold large chunks of their most liquid “less-liquid” assets during the third quarter of 2013 as the government-sponsored enterprises continued to shift their business away from retained investments. The GSEs reduced their combined holdings of commercial MBS by 32.1 percent during the third quarter, according to a new Inside MBS & ABS analysis of their retained portfolios. The Federal Housing Finance Agency has directed the two companies to accelerate their portfolio trimming by focusing on “less-liquid” assets other than their own MBS. The commercial MBS market has been...[Includes one data chart]

Citigroup Global Markets Realty last week issued the first jumbo mortgage-backed security in more than a month and Redwood Trust is preparing a deal for next week. However, industry participants suggest that jumbo MBS issuance will remain limited through at least early 2014 due to a lack of demand from investors and strong portfolio appetite jumbos among from big banks. Citi’s $209.95 million jumbo MBS, its first in the new era of the non-agency market, wasn’t met with strong demand, according to ...

The weak market for jumbo mortgage-backed securities has prompted Redwood Trust to look into other activities beyond a focus on jumbo mortgages. The real estate investment trust started aggregating agency mortgages in October. Martin Hughes, Redwood’s CEO, said the conforming-mortgage activity allows Redwood to create mortgage-servicing rights to hold as investments and potentially participate in risk-sharing activities with the GSEs at the originator level. “This market opportunity is many times ...

Real estate investment trusts working to build their jumbo mortgage-backed security operations note that while the environment is currently challenging, they are optimistic about the long term. “What we’re trying to do is have an originator network in place so that we can take advantage of the opportunities,” said Bill Roth, CIO of Two Harbors Investment. “And it may not be in prime jumbo in the short run.” The REIT issued a $434.17 million jumbo MBS in August, its first. Two Harbors said it ...

With qualified-mortgage underwriting requirements set to take effect Jan. 10, the rating services are beginning to detail the role QM status will play in ratings for non-agency mortgage-backed securities. Fitch Ratings appears to be the furthest along in adjusting its ratings process to account for the Consumer Financial Protection Bureau’s ability-to-repay rule and QM standards. The rating service this week released its initial perspective for rating non-agency MBS with loans originated in a QM world ...

Subprime originations remain subdued. The Federal Reserve’s senior loan officer opinion survey for the third quarter included 68 lenders that originate prime mortgages. However, less than four said they offer subprime mortgages. And nonprime borrowers accounted for 5.82 percent of mortgages originated in the second quarter of 2013, Transunion said this week. Ocwen Financial said a settlement with state attorneys general is still in the works. “In light of the substantial ... [Includes three briefs]

Ginnie Mae issuers reported a 14.0 percent drop in mortgage-backed securities issuances in the third quarter from the previous quarter as refinance activity declined further and home-purchase lending slowed during the period, according to an Inside FHA Lending analysis of Ginnie Mae data. Despite the quarter-over-quarter drop, Ginnie production rose 11.2 percent in the first nine months of 2013. Volume over this period totaled $313.8 million, of which 60.3 percent were FHA loans, 33.9 percent were VA, and 5.2 percent were rural housing loans. Ginnie MBS issuance dropped gradually ... [2 charts]