In a ruling that may impact future fair-lending class actions, a federal district court judge in Manhattan has denied class certification in a lawsuit brought by the American Civil Liberties Union and National Consumer Law Center against global investment bank Morgan Stanley. Filed in October 2012, the suit was brought on behalf of African American borrowers in Detroit who obtained subprime loans from New Century Mortgage, a now-defunct originator that sold the loans to secondary-market purchasers, including Morgan Stanley, which then securitized them. New Century originated...

Interest rate volatility and other issues caused a reduction in jumbo-related profitability at some nonbanks in the first quarter of 2015. However, many nonbank conduits remain optimistic that the jumbo business will pay off, particularly via issuance of mortgage-backed securities. Redwood Trust reported $2.0 million in income from residential mortgage banking activities in the first quarter of 2015, down 80 percent from the previous quarter. The decline was primarily due to lower margins on ...

A sharp divide in the decline of nonprime mortgages held by the government-sponsored enterprises persists, according to a new analysis by Inside Nonconforming Markets. Holdings of nonprime mortgage-backed securities are down much more sharply at Fannie Mae and Freddie Mac than the GSEs’ holdings of purchased or guaranteed nonprime loans. Fannie and Freddie held a combined $50.78 billion in nonprime MBS as of the end of ... [Includes one data chart]

Impac Mortgage Holdings increased its originations of non-qualified mortgages in the first quarter of 2015. The nonbank had $11.3 million in originations of its AltQM products during the quarter, topping the $7.0 million in non-QM production Impac had in the second half of 2014. Underwriting standards for jumbo mortgages continued to loosen in April, according to the Mortgage Bankers Association. Underwriting for jumbos has loosened almost every month since ... [Includes three briefs]

Price reduction and improving economic factors helped push FHA volume up in the first quarter of 2015, according to an Inside FHA/VA Lending analysis of agency data. Production of forward single-family mortgages insured by FHA increased by 12.3 percent in the first quarter to $39.5 billion from $35.2 billion in the prior quarter, powered by a sharp uptick in refinances. FHA’s total refi business jumped from $2.29 billion in endorsements in February, a month of record snowstorms in the Northeast, to $8.15 billion in March. Total FHA forward-mortgage business rose by 83.8 percent from February, data showed. FHA streamline refis rose a whopping 144.1 percent quarter-over-quarter while conventional-to-FHA refis jumped 29.2 percent over the same period. Falling purchase loan volume, which was the reason for the overall decline in FHA originations last year, spilled over into ... [2 charts]

A unique stop-advance feature included in the jumbo MBS issued by Redwood Trust late last week was viewed favorably by investors, according to officials at the real estate investment trust. “We are pleased not only with the pricing execution on this transaction, but also with the level and depth of AAA investor interest,” Marty Hughes, Redwood’s CEO, said this week. The $356.45 million Sequoia Mortgage Trust 2015-2 included...

The Community Home Lenders Association recently sent a letter to CFPB Director Richard Cordray, asking the bureau to require consumer disclosures on each mortgage loan that indicate whether the mortgage loan originator working on that loan is licensed. Such disclosures also should show whether the MLO has passed the SAFE Act test, and has completed an independent background check and SAFE Act approved pre-licensing and continuing education courses. CHLA also recommended that consumers be told if their loan originator previously failed (and never passed) the SAFE Act test or has ever been denied a state license because they failed a background check. “The CFPB is carrying out its ‘Know Before You Owe’ initiative, to improve consumer understanding and mortgage disclosures” ...

To attract large investors, the Treasury Department suggests that non-agency MBS include a deal agent with a fiduciary duty. “Under corporate law, directors must discharge two primary fiduciary duties: duty of care and duty of loyalty,” said Michael Stegman, counselor to the Treasury on housing finance policy, in a speech late last week. “In the context of private-label securitizations, these duties seemed sensible and logical to us.” He used...

New lenders that specialize in loans that don’t meet the government’s qualified-mortgage standards continue to draw up blueprints and raise capital – or at least try to – but very few of them are banking on securitization as a take-out strategy. However, all that may change with the launch of LendSure Financial Services, a San Diego startup headed by a handful of veterans from the subprime industry of yesteryear, including Jim Konrath, Stu Marvin and Joe Lydon. According to one non-agency investor briefed on LendSure’s plans, securitization is...

While jumbo MBS issued in recent years have performed exceptionally well, some senior-support bonds on new jumbo MBS have credit risks similar to what was experienced during the financial crisis, according to analysts at Andrew Davidson & Co. In a recent analysis, Richard Ellson and Allison Ying raised concerns about the super-senior structures that have become common on jumbo MBS in recent years. They noted that when Redwood Trust started working to revive jumbo MBS issuance in 2010, the issuer used a much simpler structure. However, in the past few years, Redwood and many other issuers have increasingly used...