Primary market originators and due diligence providers say the elusive market in private placement MBS deals has been gaining strength this year. “We’re seeing three to five private deals a month,” said Jeff Taylor, managing partner of Digital Risk, a New York-based risk management and due diligence firm. As for the underlying product, it’s across the board, he added. “It can be jumbo, nonperforming, and re-performing.” But the deals are also much smaller than the rapidly growing public MBS deals. Digital Risk, which conducts due diligence reviews on the underlying collateral, said...

The non-agency jumbo mortgage-backed security market expanded significantly in the first quarter of 2013, with more new issuance than was produced in all of last year, according to the Inside Mortgage Finance MBS Database. Issuance showed no signs of slowing down entering the second quarter, led by Redwood Trust. Some $3.95 billion in non-agency jumbo MBS was issued in the first quarter, compared with $3.46 billion in issuance in all of last year. The last time non-agency ... [Includes one data chart]

Moody’s Investors Service said it would not have given its highest rating to the jumbo mortgage-backed security issued last week by JPMorgan Chase because of concerns about the deal’s representation and warranty framework and the lack of risk retention by Chase. DBRS, Fitch Ratings and Kroll Bond Rating Agency gave JPMorgan Mortgage Trust 2013-1 AAA ratings with credit enhancement of 7.40 percent on the top-rated tranche. The rating services said the credit enhancement on the deal was ...

With banks starting to issue jumbo mortgage-backed securities instead of holding originations in portfolio, the sector has expanded beyond the two nonbanks that propped up non-agency jumbo MBS issuance since 2010. The activity shows favorable economics for non-agency MBS, including tighter spreads on interest rates between conforming mortgages and non-agency jumbos. The average interest rate on a 30-year fixed-rate conforming mortgage was 3.596 percent this week, according to Inside Mortgage Finance ...

Fannie Mae and Freddie Mac suffered lower losses on their nonprime mortgage holdings in 2012 compared with previous years as mortgage performance has stabilized and investor demand for vintage non-agency mortgage-backed securities has increased. However, the government-sponsored enterprises have not realized profits on their vintage non-agency MBS holdings as they have employed a buy-and-hold strategy since 2008. The GSEs held a combined $103.4 billion of nonprime MBS in portfolio and ... [Includes one data chart]

Springleaf Financial is set to issue another subprime mortgage-backed security backed by vintage originations. The fifth deal from Springleaf since 2011 shows continued demand from investors for non-agency MBS. Springleaf’s $835.11 million MBS will receive a AAA rating with loss coverage of 55.5 percent on the top-rated tranche, according to a presale report released this week by Standard & Poor’s. The average seasoning of the loans is seven years. As with previous Springleaf deals, all of ...

The FHA is seeking comment on a proposal to change the period for reviewing loans for direct endorsement from pre- to post-closing in order to increase the number of acceptable loans and, therefore, reduce any potential risk to the Mutual Mortgage Insurance Fund. Under the proposal, a lender applying for unconditional direct endorsement authority would be required to submit the necessary loan files only after closing. After determining that the mortgage is acceptable and meets all FHA requirements, the agency would notify the lender that the loan has been endorsed. Current regulations provide for ...

The FHA may allow a borrower’s 401(k) retirement fund to be included in the calculation of debt-to-income (DTI) ratio, according to the agency. Normally, up to 60 percent of the fund’s value may be included in the DTI ratio, the agency said. Fund assets, such as Individual Retirement Accounts, thrift savings plans, 401(k) retirement plan and Keogh Accounts, may be counted in the underwriting, it added. The rule remains applicable unless the borrower presents proof that a higher percentage may be withdrawn after subtracting any federal income tax and withdrawal penalties. In such cases, the lender would ...

Moody’s Investors Service issued a “special comment” this week to warn that the new non-agency jumbo MBS issued by JPMorgan Chase would not have received a AAA rating from Moody’s, had the firm been asked to rate the deal. The rating service raised concerns about representations and warranties and a lack of risk retention on the deal.

It hasn’t been an easy time for due diligence firms that make their living off the mortgage business, at least not this year. Firms like Allonhill LLC, which bulked up on staff to handle the rush of work on investor buyback demands, have been cutting back in recent months as those contracts run their natural course.