Although Redwood Trust’s soup-to-nuts approach to representations and warranties has dominated the fledgling recovery in jumbo mortgage-backed securities issuance, some experts think a shorter term alternative may gain popularity among issuers. It’s important for investors and rating services to anticipate putbacks in jumbo MBS, Peter Sack, a managing director at Credit Suisse, said during a panel session at the recent secondary market conference sponsored by the Mortgage Bankers Association ...

Issuers of non-agency mortgage-backed securities should disclose when they seek a rating from a firm and ultimately decide not to hire the firm, according to a variety of non-agency participants. “If one rating is 7 percent subordination and the other is 15 percent, we don’t need to accept the 15 percent subordination, but we do need to disclose the 15 percent subordination opinion to investors,” Martin Hughes, CEO of Redwood Trust, said this week at a roundtable hosted by the Securities and Exchange Commission ...

Investors in subordinate tranches of recently issued non-agency jumbo mortgage-backed securities have seen strong returns on the investments. Real estate investment trusts have focused on the assets, which are likely to be subject to risk-retention requirements going forward. “We like the loan assets and the ability to diversify our funding in this manner where we don’t have a duration gap, there is no margin risk, and the assets and liabilities amortize and prepay at the same rate, eliminating the need for ...

Redwood Trust has recently put an increased emphasis on acquiring purchase mortgages. The loans have higher loan-to-value ratios than refinances included in Redwood’s non-agency mortgage-backed security issuance, a potential concern according to Kroll Bond Rating Agency. Redwood said it acquired $955 million in purchase mortgages from its correspondent lenders in the first quarter of 2013, up from $550 million the previous quarter. The purchase-mortgage share of Redwood’s acquisitions is also increasing ...

A significant increase in the non-agency sector’s share of mortgage finance could be completed with a revised infrastructure for non-agency mortgage-backed securities, according to Edward DeMarco, acting director of the Federal Housing Finance Agency. He said the model wouldn’t need to rely on a government guaranty to attract funding to the mortgage market, but would look to standardization and rules for enforcing contracts. While many housing finance reform proposals have called for a re-creation of ...

Activity in the non-agency jumbo market could play a big role in determining how to reform the government-sponsored enterprises, according to industry analysts. While policymakers consider what to do with Fannie Mae and Freddie Mac, some are calling for a larger role for the jumbo market as a test for GSE reform. Mark Willis, a resident research fellow at New York University’s Furman Center for Real Estate and Urban Policy, said the Federal Housing Finance Agency should increase the GSEs’ guaranty fees for ...

FHA loans saw an improvement in delinquencies even as the mortgage industry reported an increase in the overall delinquency rate for single-family mortgages at the end of the first quarter of 2013, according to the Mortgage Bankers Association’s latest national delinquency survey. Among loan types, the FHA saw the largest improvement on a seasonally adjusted basis as its delinquency rate dropped to 10.97 percent in the first quarter, down 20 basis points from the previous quarter. This was good news for an agency that has been battling to reduce losses and stabilize its Mutual Mortgage Insurance Fund. However, the refreshing change was ...

Issuance of non-agency jumbo mortgage-backed securities continues to increase along with the number of issuers participating in the market. Issuers acknowledge that spreads on AAA non-agency MBS are widening, causing margins to decline, but they suggest that a significant increase in non-agency MBS production will help tighten spreads, benefitting issuers. Credit Suisse issued its third non-agency jumbo MBS of the year this week. The $393.77 million deal received AAA ratings from DBRS and ...

While originations included in non-agency jumbo mortgage-backed securities in recent years have been of high-quality, significant differences exist among originators, according to a new analysis by Inside Nonconforming Markets. The average credit score on mortgages included in Redwood Trust’s non-agency jumbo MBS from 2011 through the first quarter of this year was 771.2, largely driven by First Republic Bank, which accounted for 47.0 percent of originations securitized by Redwood ... [Includes two data charts]

“It’s not a money problem, there’s plenty of money out there,” Martin Hughes, president and CEO of Redwood Trust, said last week at a hearing by the House Financial Services Committee. “The difficulty now is the uncertainty of investors that need to be waved back into the water.” Hughes said non-agency mortgage-backed security issuers need to make adjustments for investors. “I believe we need to first address investors’ demands for better risk mitigation, transparency, and alignment of interests ...