Ocwen Financial, the largest servicer of nonprime mortgages, continues to face regulatory and legal pressure as investors voted to terminate the company as servicer of subprime mortgage-backed securities they own. The company said its servicing of two MBS with a combined unpaid principal balance of $260 million is being transferred. The termination vote was allowed due to downgrades to Ocwen’s servicer ratings. Some 119 non-agency MBS ... [Includes one data chart]

Morgan Stanley has agreed in principle with the Department of Justice to pay $2.6 billion to resolve MBS claims the agency’s civil division indicated it would bring against the company, according to a new disclosure from the Wall Street firm. Morgan Stanley’s disclosure about a potential MBS lawsuit by the U.S. Attorney for the Northern District of California contained no other details. However, the firm increased its legal reserves by $2.8 billion to cover any potential settlement and other pending legacy-related MBS disputes. The adjustment increased...

Department of Housing and Urban Development Secretary Julian Castro faced the wrath of the GOP majority during a House Financial Services Committee hearing this week on the state of the FHA, focusing on the agency’s recent decision to cut annual mortgage insurance premiums. While Castro may have been warned about stepping into the lion’s den, he appeared ill-prepared for the confrontation with Republicans, unable to answer basic questions such as FHA’s net income, overall delinquency rate and the serious delinquency rate for 2014. Democrats, on the other hand, helped the embattled secretary regain his footing by expressing support for FHA’s efforts and putting perspective on some of FHA’s actions to strengthen the Mutual Mortgage Insurance Fund and help qualify more borrowers for FHA credit. Committee Chairman Jeb Hensarling, R-TX, set...

Regulators, rating services and investors are all targeting Ocwen Financial’s servicing of mortgages in non-agency mortgage-backed securities. Company officials responded by acknowledging some of the issues while strongly pushing back on others. Fitch Ratings and Moody’s Investors Service both recently downgraded Ocwen’s servicer ratings. When a servicer’s ratings fall below a certain level, non-agency MBS investors sometimes have the option to ...

Streamlined FHA refinance volume increased slightly in the third quarter of 2014 as incentives put in place in 2013 continued to attract FHA borrowers, according to an Inside FHA Lending analysis of agency information. Streamlined refi production rose 2.4 percent in the third quarter of last year, closing a nine-month period with $14.2 billion in new loans. A comparison of nine-month FHA-to-FHA refinance activity, however, shows volume falling a hefty 79.6 percent year over year. As of Sept. 30, 2014, streamlined refinances accounted for 14.3 percent of total FHA originations. The FHA announced a revised streamlined refi program in December 2013 to help FHA borrowers with underwater mortgages to refinance without added cost or penalty. The loan does not require an appraisal or verification of job, income or credit. A perfect, three-month payment history is required and ... [ 1 chart ]

Even though modified loans represent a larger share of non-agency MBS trusts these days, structured product analysts at Wells Fargo Securities have detected a notable year-over-year decrease in modifications. To be sure, modified loans have become an increasing portion of such trusts lately. “About 62 percent of subprime in terms of [unpaid principal balance] has been modified, 39 percent of option adjustable-rate mortgages, 31 percent of Alt A, and 19 percent of prime,” the analysts reported. “Modification activity, however, has slowed down...

Wall Street analysts are generally projecting a year of stability for most asset classes in the consumer ABS space for 2015, despite a few more losses and an anticipated increase in interest rates. The one exception might be subprime auto. Analysts at Standard & Poor’s Ratings Services cited a favorable overall environment characterized by a strengthening economy, healthy consumer credit fundamentals, and robust structural protections in ABS transactions. “We expect...

Most major servicers participating in the Home Affordable Modification Program and subject to national mortgage servicing settlements are generally improving their performance, according to officials overseeing the programs. CitiMortgage will receive incentive payments from HAMP that were being withheld due to poor performance, the Treasury Department noted in a report released last week. Citi went from needing “substantial” improvement in HAMP ...

The servicing transfer from Wells Fargo to Ocwen Financial that had been on hold for more than eight months was cancelled last week by the two firms. Scrutiny from the New York Department of Financial Services prompted Ocwen to place the transfer on hold in February. The transfer was first announced in January and would have involved servicing on non-agency mortgage-backed securities with an unpaid principal balance of $35.9 billion along with $3.3 billion in mortgages serviced for ...

Mortgage delinquencies followed a seasonal trend and rose in the third quarter of 2014, according to the Inside Mortgage Finance Large Servicer Delinquency Index. The Mortgage Bankers Association, however, reported a 19 basis point drop on a seasonally-adjusted basis that put the overall rate at 5.85 percent, the lowest since the financial crisis. The 24 lenders that reported delinquency data to Inside Mortgage Finance had an average delinquency rate of 6.63 percent, up from 6.54 percent in the second quarter. Unadjusted delinquency rates usually spike higher in the third quarter, even in the midst of a downward trend. The delinquency index also showed...[Includes one data chart]