The consensus among speakers at the ABS Vegas conference this week appeared to be that the MBS market is unlikely to change significantly this year. “The status quo is comfortable,” said Larry White, an economics professor at New York University’s business school. Issuers of non-agency MBS are working on reducing the government-sponsored enterprises’ dominance of the secondary market for mortgages, but the chicken-and-egg problem persists. New non-agency issuance has ground to a standstill, and Congress has been slow to move housing-finance reform legislation. In the meantime, industry observers expect...

The Structured Finance Industry Group announced this week that it will convene a taskforce to establish standardized representations and warranties for new non-agency MBS. The “Project RMBS 3.0” effort will involve a wide variety of industry participants in an effort to attract investors to non-agency MBS. If the effort sounds familiar, that’s because the American Securitization Forum issued benchmark reps and warrants in 2009 as part of its Project Restart initiative. “We want to resolve these issues once and for all,” said Eric Kaplan, managing director of Shellpoint Partners and one of the leaders of Project RMBS 3.0, during this week’s ABS Vegas conference sponsored by the SFIG and Information Management Network. He said...

The statute of limitations for filing representation-and-warranty claims on non-agency MBS starts when a deal is issued, not when a defective loan isn’t cured, according to a recent ruling by the appellate court in New York. Industry analysts suggest that the ruling will limit rep-and-warrant claims on vintage non-agency MBS as well as future claims on recently issued jumbo MBS. In December, the appellate division of New York’s Supreme Court dismissed ACE Securities Corp. v. DB Structured Products. The lawsuit was brought by a trustee on behalf of investors against Deutsche Bank, the issuer of ACE 2006-SL2, a non-agency MBS issued in 2006. The investors, along with HSBC Bank, the trustee, were looking to enforce rep-and-warrant claims in 2012. New York imposes...

The Dutch State Treasury Agency this week is auctioning $4.3 billion in non-agency MBS once held by ING, which will leave the government entity still holding about $2.2 billion of securities. The sale represents less than 1.0 percent of outstanding non-agency MBS, and it was expected to have little impact on pricing for these assets. Bids on the portfolio were...

Citadel Loan Servicing, arguably the largest active originator of nonprime mortgages, plans to move forward with its first non-agency MBS by the middle of this year. Company founder and CEO Dan Perl told Inside MBS & ABS that the firm has already picked a custodian as well as what he calls a “watchdog” to review the collateral. The watchdog in question appears to be Clayton Holdings, said one source, but officials at both firms would not discuss the matter. Perl declined...

Banks with the capacity to hold jumbo mortgages in portfolio were major contributors to jumbo mortgage-backed securities issued in 2013, according to a new ranking and analysis by Inside Nonconforming Markets. Fixed-rate mortgages also dominated the population of loans bundled into jumbo MBS last year. First Republic Bank was the biggest originator of securitized jumbos in 2013, with a market share more than double the next closest lender. Some $2.16 billion in originations from [Includes two data charts]

Issuance of jumbo mortgage-backed securities has ground to a halt recently but that hasn’t stopped lenders that were participating in the jumbo MBS market from originating loans. Instead, some have shifted their output of jumbos to whole-loan sales. PrimeLending, W.J. Bradley Mortgage and other jumbo lenders whose loans helped fuel the surge in jumbo MBS issuance in the first half of 2013 have shifted to selling whole loans directly to investors, often banks. Scott Eggen, director of capital markets at PrimeLending ...

The Home Affordable Modification Program’s second-lien loss-mitigation program has seen increased activity in recent months and is poised for further growth as agency mortgages were recently added to the program. About $2.5 billion in outstanding second-lien balances have been forgiven via the program. Some 123,714 HAMP Second-Lien Modification Program mods were active as of the end of November, according to the Treasury Department. Through 11 months in 2013, 21,000 2MP mods had been started ...

While originations of prime conforming mortgages declined significantly in the fourth quarter of 2013, there are new signs of life in the nonprime sector. Citadel Loan Servicing raised $200 million in seed money a year ago and is operating at a current run-rate of $130 million a year. The lender offers subprime mortgages with a 20 percent downpayment requirement. Company founder and CEO Dan Perl told Inside Nonconforming Markets that the firm hopes to issue a nonprime mortgage-backed security ...

Subprime borrowers opted for adjustable-rate mortgages during the last boom due to economic considerations, not because of a lack of financial sophistication, according to new research published by the Federal Reserve Bank of San Francisco. The Fed researchers found that even accounting for house price appreciation, subprime borrowers were at least as sensitive to changes in loan pricing and other interest-rate related fundamentals as borrowers with credit scores of 760 and above. The findings were detailed in ...