The strong growth in issuance of jumbo mortgage-backed securities seen since 2010 stumbled in 2014, according to a new ranking and analysis by Inside Nonconforming Markets. Some $9.79 billion in jumbo MBS were issued last year, down 25.4 percent from activity in 2013. Issuance has been constrained by bank portfolio demand for jumbo mortgages. The spike in interest rates in 2013 led to nine months of very low issuance. Rates have since fallen and a number of new jumbo MBS issuers have entered the market, but quarterly volume has struggled to reach the levels seen in early 2013. Those looking for a silver lining could...[Includes one data chart]

Jumbo lenders continue to loosen underwriting requirements in an effort to compete for volume. Some lenders are even offering jumbos with loan-to-value ratios as high as 95 percent, while three years ago a 70 percent LTV ratio was the norm. “We’ve seen a fairly rapid loosening of standards on jumbo loans,” said Michael Fratantoni, chief economist at the Mortgage Bankers Association, during an event hosted this week by the Urban Institute. “They’re still tight, but now you can get a 5 percent down jumbo loan. And minimum credit scores have been coming down.” The MBA’s Mortgage Credit Availability Index has shown...

Bank and thrift holdings of home-equity loans continued to decline in the third quarter of 2014, according to the Inside Mortgage Finance Bank Mortgage Database. However, the two top banks increased their HEL holdings from midyear, and industry analysts expect home-equity lending to continue to increase in 2015. Banks and thrifts held a total of $991.27 billion in home-equity lines of credit, HELOC commitments and closed-end second liens as of the end of the third quarter of 2014, down 0.7 percent from the previous quarter and down 3.9 percent from the third quarter of 2013. Most of the top 10 bank and thrift HEL lenders saw...[Includes one data chart]

The risk-sharing transactions that Fannie Mae and Freddie Mac started offering in 2013 have drawn some investors away from buying new jumbo mortgage-backed securities, according to industry participants. The government-sponsored enterprises say the deals that share credit risk with investors help reduce taxpayer risk. However, the returns and risk profile of Freddie’s Structured Agency Credit Risk deals and Fannie’s Connecticut Avenue Securities deals have caused some investors to abandon jumbo MBS and instead invest in the GSEs’ offerings. Aaron Pas, a senior vice president of non-agency portfolio management at American Capital Mortgage Investment, said...

FHA borrowers who refinance through the agency’s Home Affordable Modification Program will also be eligible to earn $5,000 in the sixth year of their performing, modified loan, subject to the Department of the Treasury’s guidelines, the FHA has announced. The incentive to FHA-HAMP borrowers is one of several enhancements to the Making Home Affordable program that the Department of Housing and Urban Development and the Treasury Department unveiled in December last year. The enhancements were designed to motivate homeowners in MHA to continue making timely mortgage payments, strengthen the safety net for those still facing financial hardships, and help them build equity in their homes. Under the revised HAMP guidelines, all homeowners in the program become eligible to earn $5,000 in the sixth year of their loan modification. This means a borrower’s outstanding principal balance could ...

FHA reverse mortgage production fell during the first nine months of 2014 compared to same period in the prior year due to changes made by the agency to the Home Equity Conversion Mortgage program. The nine-month HECM volume stood at $10.1 billion as of Sept. 30, down 14.8 percent from the previous nine-month period in 2013, according to an Inside FHA Lending analysis of agency data. Volume also fell 9.8 percent on a quarter-to-quarter basis. HECM purchase loans accounted for 93.5 percent of the market while a large majority, 77.0 percent, appeared to favor adjustable-rate reverse mortgages over fixed-rate reverse mortgages. Limited maximum draws in the first year and reduction of principal limit factors – actions taken by HUD to improve the HECM program – significantly decreased the demand for HECM products compared with ... [ 1 chart ]

Mortgage underwriting standards have loosened in recent years, led by the jumbo market and reduced overlays on agency mortgages, according to the Mortgage Bankers Association. However, underwriting standards aren’t nearly as lenient as they were in the early 2000s, prompting some to call for further loosening. The MBA’s Mortgage Credit Availability Index has trended up since the beginning of 2012. “Most of the action in terms of loosening has been on the jumbo side,” said Michael Fratantoni, MBA chief economist, at a talk hosted this week by the Urban Institute’s Housing Finance Policy Center. Separately, he noted...

The number of issuers offering jumbo mortgage-backed securities will increase in 2015, according to analysts at various rating services, but total issuance volume isn’t expected to grow by much compared with this year. Attracting investors willing to purchase AAA tranches of jumbo MBS remains a key obstacle. Some $5.4 billion in jumbo MBS were issued during the first three quarters in 2014, according to Inside Nonconforming Markets, including $3.1 billion in the third quarter ...

Origination of interest-only mortgages declined in 2014 after the rule took effect that made them ineligible for qualified-mortgage status, but the product is far from dead and could see a rebound in 2015. A group of 15 lenders originated a total of $21.59 billion in IOs through three quarters in 2014, according to a new Inside Nonconforming Markets analysis and ranking. That was down 28.0 percent from the same period in 2013. IO lending slowed ... [Includes one data chart]

Bank and thrift holdings of first-lien mortgages increased in the third quarter of 2014 compared with the third quarter of 2013, according to a new ranking and analysis by Inside Nonconforming Markets. Banks and thrifts held $1.76 trillion in first liens as of the end of the third quarter of 2014, up 0.4 percent compared with the same period last year. The growth was driven by jumbo mortgages. On a quarterly basis, portfolio runoff and loan sales slightly outpaced ... [Includes one data chart]