Investors in new non-agency jumbo mortgage-backed securities are particularly concerned about representations and warranties regarding mortgage underwriting. Investors at a recent roundtable hosted by Standard & Poor’s stressed that particular risks should be borne by the party with the best information. “Since originators and arrangers are in a better position to ascertain the true quality of the loans, [investors said] reps and warrants should serve to protect investors from risks arising from ...

Correspondent lenders working to sell originations to Redwood Trust are particularly comfortable with how the jumbo conduit handles appraisals. Redwood offers validation of appraisal values early in the underwriting process, providing lenders with some assurance that disagreements regarding an appraised value won’t prevent a delivery to Redwood. During a recent webinar hosted by Inside Mortgage Finance Publications, Jonathan Groesbeck, a managing director at Redwood, said appraisal validation is one of ...

The New York State Department of Financial Services has directed FHA lenders to refrain from applying the FHA’s higher mortgage insurance premiums in calculating a loan’s annual percentage rate and fully indexed rates for 60 days to prevent loans from becoming “high cost” or subprime. At the same time, the department issued guidance to conventional lenders on how to interpret existing provisions in state banking law regarding subprime loans. Statutory changes were made in 2009 to prevent some loans from becoming “subprime,” as defined by state law. Spikes in mortgage interest rates in the past few weeks plus ...

A Wells Fargo securities trial is underway in Minnesota federal district court where jurors will decide whether the financial institution had misrepresented the safety and soundness of its securities lending program and lied to investors about the risks involved or whether the economic crisis was to blame for investor losses. The securities lending program (SLP) was marketed to large institutional investors, including pension funds. As part of the SLP, Wells Fargo held the participants’ securities in custodial accounts and loaned them temporarily to brokers. The brokers then posted cash collateral, which the bank invested until the securities were returned. Under agreements with SLP participants, Wells Fargo acted...

Participants in the non-agency mortgage-backed security market are concerned about the strength of the sector as interest rates and other pricing metrics have increased significantly in recent weeks. “When the 10-year Treasury rate started to rise recently and the mortgage interest rate spread out by 20 basis points, the non-agency MBS market spread out by 50 basis points,” said Lewis Ranieri, chairman of Ranieri Partners, at a forum hosted by the Bipartisan Policy Center last week. “And given there’s ...

Shellpoint Partners issued its first non-agency jumbo mortgage-backed security this week, which differs in a number of ways from non-agency MBS issued since 2010. The deal is an attempt to loosen – slightly – non-agency MBS underwriting standards, although the rating services were critical of the originator, New Penn Financial. Shellpoint Asset Funding Trust 2013-1 was initially planned as a $261.58 million non-agency MBS, according to presale reports issued last week. The deal was reportedly restructured ...

The preferences of investors and the rating services play a significant role in the characteristics of mortgages included in non-agency jumbo mortgage-backed securities, according to industry participants. “The rating agencies are a first part of the analysis, but investors in these bonds are paying very careful attention to these loan characteristics, to credit exceptions and to who the lenders are,” Peter Sack, a managing director at Credit Suisse, said this week at a webinar ...

When interest rates rise rapidly – as they have the past two weeks – lenders suffer. But it appears the few dozen or so hard-money and subprime lenders operating quietly in the trenches are doing just fine and are even seeing an increase in loan requests. Mark Mozilo, a principal in CALCAP Advisors, told Inside Nonconforming Markets that his hard-money firm will fund 40 loans in the second quarter of 2013, its highest quarterly volume to date. The company is just a few years old. Mozilo added that ...

Lenders that originate home loans to hold in portfolio are concerned about the regulatory consequences of originating non-qualified mortgages. While some have asked for a blanket exemption from liability for non-QMs held in portfolio, Democrats in Congress appear unlikely to approve such changes. “Congress should amend the ability-to-repay statute to grant QM status to all mortgage loans held in portfolio by community banks,” Charles Vice, commissioner of the Kentucky Department of ...

New single-family MBS issuance accounted for a record 90.1 percent of home loan originations during the first quarter of 2013, according to a new Inside MBS & ABS analysis. An estimated $500.0 billion of new home mortgages were originated during the first three months of the year, down 4.8 percent from the fourth quarter of 2012, as refinance activity began to weaken. But mortgage securitization activity declined at a slower pace, falling just 0.6 percent in the first quarter. That pushed...[Includes one data chart]