Moody’s 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. Moody’s 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]

Bank holdings of home-equity loans continue to decline, with mixed performance trends. Regulators warn that home-equity lines of credit originated before the financial crisis are a particular concern as the loans are set to reach their amortization periods. Banks and thrifts held $1.05 trillion in HELOCs, HELOC commitments and closed-end seconds as of the end of the second quarter of 2013, according to the Inside Mortgage Finance Bank Mortgage Database. The holdings declined by 1.9 percent ... [Includes one data chart]

The Federal Home Loan Bank of Chicago has announced a partnership with Ginnie Mae to issue securities guaranteed by the secondary market agency and backed by home loans originated by member financial institutions. The new conduit product, “MPF Government Mortgage-Backed Securities,” provides another secondary mortgage market outlet for lenders originating mortgages insured by the FHA or guaranteed by the VA or the Rural Housing Service. Low-volume lenders that currently lack direct access to the secondary market are expected to benefit from the new FHLBank program. MPF GMBS would allow lenders to ... [1 chart]

Now that PennyMac Mortgage Investment Trust has put together its first jumbo MBS, can a security collateralized by non-performing loans be far behind? “We’ve looked at it,” said a company spokesman. “We’d like to do one down the road, but we’re not there yet. For us, it will happen when the execution of NPLs is more economical.” One thing is...

A reduction in agency loan limits would make a small portion of today’s mortgage market ineligible for the government-sponsored enterprises, according to a new analysis by Inside Nonconforming Markets. However, industry participants suggest that lower loan limits will help increase participation in the non-agency market and test whether the sector can take even more share from Fannie Mae and Freddie Mac. Mortgages with loan balances greater than $417,000 accounted for ... [Includes one data chart]

PennyMac Corp. wanted to test the market for non-agency jumbo mortgage-backed securities but it wasn’t generating enough collateral through its conduit program and turned to a bulk purchase to get a critical mass. The $550.46 million PMT Loan Trust 2013-J1 is set to receive AAA ratings with credit enhancement of 7.75 percent for the top-rated tranche. Some 70.7 percent of the mortgages to be included in the deal were acquired in bulk from Bank of America, which aggregated the loans from ...

Shellpoint Partners is preparing to issue a $308.64 million non-agency jumbo mortgage-backed security and officials at the firm are hoping that interest rates stay calm at least until the issuance is completed. Interest rates spiked after Shellpoint offered its first jumbo MBS in June, a $261.58 million deal, prompting the company to voluntarily provide credit enhancement of 20.0 percent on the security – double what was required by the rating services – in an effort to attract investors. The latest deal features ...

A number of companies are preparing to enter the non-agency jumbo mortgage-backed security market, bolstered by expected decreases to agency loan limits and eventual resolution of the conservatorships of the government-sponsored enterprises. David Akre, a managing director at Five Oaks Investment, said licensing for the real estate investment trust’s jumbo operations is nearly complete and the establishment of warehouse funding is 90 percent complete. David Carroll, CEO of Five Oaks, said increased competition ...

Lenders have started to loosen their underwriting standards for jumbo mortgages in an effort to increase originations for borrowers who have performed exceptionally well in recent years. Loan-to-value ratio requirements in particular have loosened, allowing for lower downpayments or increased use of second liens. After the non-agency mortgage-backed security market collapsed in 2008, combined LTV ratios of 70 percent were common for jumbos as lenders looked to prevent pricey foreclosures on ...