Sterling Bank & Trust does limited income documentation under its bank statement program but the bank said there have been zero delinquencies on the nearly $1.00 billion in such loans the bank has funded in the past five years. Some $33.2 million in loans from Sterling’s Advantage Home Ownership Program were included in the $217.0 million non-agency mortgage-backed security issued by Lone Star Funds last week. Rating reports on the MBS by DBRS and Fitch Ratings provided ...

CORRECTION: Redwood Trust’s Choice program doesn’t allow for stated-income documentation, as originally reported in the Sept. 9, 2016, issue of Inside Nonconforming Markets. And Redwood does allow underwriting exceptions for Choice mortgages, a change that was made after the program was introduced. The baseline conforming loan limit for Fannie Mae and Freddie Mac will likely go up to about $422,000 in 2017, according to an Inside ... [Includes four briefs]

Some residential mortgage-backed securities loan originators are moving away from performing internal post-acquisition quality control loan reviews in lieu of obtaining feedback from their whole loan investors, according to a new report from Moody’s Investors Service. “Some aggregators are relying more on their investors for quality control feedback,” said Moody’s. The ratings service identified in particular Redwood Residential Acquisition Corp. and JPMorgan Mortgage Acquisition Corp., which it said “are relying more on feedback from whole loan investors to monitor the quality of due diligence firm loan reviews, as opposed to conducting their own internal reviews, since a large portion of their acquisitions are sold in whole-loan trades.” Moody’s noted...

Bank and thrift holdings of non-agency ABS fell slightly during the second quarter, but the industry is not backing away from the consumer credit space. Depositories prefer to hold these assets in unsecuritized form on their balance sheets. A new Inside MBS & ABS analysis of call-report data shows that banks and thrifts held $130.98 billion of non-mortgage ABS at the end of June. That was down 0.7 percent from March and represented the 10th consecutive quarterly decline since the end of 2013, when the industry’s ABS holdings hit their all-time peak. According to the Securities Industry and Financial Markets Association, the supply of non-mortgage ABS debt outstanding actually rose...[Includes two data tables]

A federal district court judge in Manhattan has named a lead master to review 9,342 mortgages for material breaches following a put-back trial against UBS Real Estate Securities. The trial in the U.S. District Court for the Southern District of New York will determine whether UBS breached certain representations and warranties and may have to repurchase the defective loans originally pooled in three trusts. U.S. Bank, the trustee for all three pools, is seeking more than $2 billion in damages, court filings show. U.S. Bank sued...

Mortgage originators reported a sharp increase in home-equity lending during the second quarter of 2016, although it wasn’t as robust a gain as the 34.2 percent surge in first-lien originations. Lenders generated an estimated $53.5 billion in home-equity business during the second quarter, an increase of 18.9 percent from the first three months of the year. It was the strongest quarterly production number for the HEL market since the financial crisis. Halfway through 2016, home-equity lending was up 15.9 percent from last year and tracking toward $200 billion in annual production. Although home-equity lending has strengthened over the past few years as house prices have recovered to pre-crisis levels, the outstanding supply of home-equity debt continues...[Includes three data tables]

Retail lending through brick-and-mortar branches and consumer-direct programs was the biggest production channel in conventional mortgage lending but had a somewhat smaller share in government-insured lending, according to an exclusive analysis by Inside Mortgage Finance. Retail production played a dominant role in the jumbo market, where it accounted for 79.3 percent of originations over the 18-month period ending in June 2016. Correspondent production played a meaningful role, accounting for 16.1 percent of jumbo originations, but brokers (4.6 percent) had a relatively thin share of the jumbo market. Brokers’ strength was...[Includes one data table]

An increase in interest rates will help boost originations of non-agency nonprime mortgages, according to panelists at a webinar hosted by Inside Mortgage Finance this week. Higher interest rates will make it less attractive for prime borrowers to refinance, which could force lenders to look for volume elsewhere, including the nonprime market. Purchase mortgages account for a large share of the nonprime loans originated in recent years and higher interest rates could also increase nonprime mortgages aimed at debt consolidation. Matthew Nichols, CEO of Deephaven Mortgage, said...

Lone Star Funds is preparing to issue a $216.97 million MBS backed by newly originated nonprime mortgages, according to presale reports published this week. The deal will help the market for new nonprime MBS outpace issuance of jumbo MBS, at least momentarily. Last month, Deephaven Mortgage issued a $154.33 million MBS backed by new nonprime mortgages and Angel Oak Capital Advisors issued a $132.65 million MBS, neither of which received credit ratings. Lone Star’s COLT 2016-2 is scheduled to close next week. Two jumbo MBS were issued...

Investor demand for nonprime whole loans is increasing – which is a good thing for primary market originators – but will it create problems for firms that want to issue securities? In some quarters, there’s a concern that if enough investors appear, it will increase whole-loan prices, making securitization less economical and therefore more difficult. “We’re definitely seeing...