Wells Fargo recently determined that it will refinance up to 40,000 borrowers as part of the recent $25.0 billion national servicing settlement. The bank had previously estimated that it would refi 20,000 loans under the settlement, which targets portfolio loans with negative equity. “The expectations ... exceed the amounts that would result from just meeting our minimum commitments under the refinance program due to the significantly higher than expected response we have received from our customers in ...

Home Affordable Modification Program servicers are increasingly offering principal reduction loan modifications to non-agency borrowers, according to the Treasury Department. The increase comes after the Treasury tripled the incentives that can be paid to investors beginning in March, though principal reduction mods have yet to increase significantly due to the change. In recent months, about 70.0 percent of eligible non-agency HAMP borrowers received some form of principal reduction ... [Includes one chart]

It has been another busy week in the turbulent world of litigation over non-agency mortgage-backed securities. The Federal Deposit Insurance Corp. filed lawsuits regarding non-agency MBS, Wells Fargo agreed to settle non-agency MBS-related charges with the Securities and Exchange Commission and the Department of Justice and the SEC dropped its non-agency investigation into actions by Goldman Sachs. The FDIC lawsuits against 15 issuers and underwriters relate to $1.46 billion in AAA tranches of non-agency MBS ...

Springleaf Financial Services is gearing up to issue its second non-agency MBS of the year, a $970.0 million deal backed by seasoned subprime mortgages. The company, formerly known as American General Finance, stopped new residential mortgage originations in January of this year. Now owned by Fortress Investment, Springleaf issued a $473.1 million MBS backed by seasoned subprime loans in early April. At the end of the first quarter, the company said it had $9.7 billion of real-estate finance receivables on its books, most of which were classified as nonprime or subprime. Springleaf Mortgage Loan Trust 2012-2 features...

Redwood Trust turned profits on the three non-agency jumbo mortgage-backed securities it issued thus far this year, with “strong investor demand.” Meanwhile, Springleaf Financial is set to issue another subprime MBS backed by seasoned loans. Officials at Redwood said they plan to issue another non-agency jumbo MBS before the end of the third quarter of 2012 and they are optimistic about future non-agency activity. “We are a long way from declaring victory, but we like our steady progress, the way the playing field is ... [Includes one chart]

Major investors in non-agency mortgage-backed securities said they are years away from being confident enough in the market to support a revival of non-agency MBS issuance. Damon Silvers, associate general counsel for the AFL-CIO, said significant reforms must be put into place before pension funds will feel comfortable buying non-agency MBS again. “I’m not optimistic that the kinds of moves that need to be made in terms of the banking system or the mortgage-backed securities markets are likely to be made anytime soon,” he said ...

Bank investments in vintage non-agency mortgage-backed securities have increased recently due to a number of factors specific to the sector as well as broader economic issues. However, Standard & Poor’s warned last week that some banks are increasingly relying on non-agency MBS to prop up earnings, which could lead banks to take even further risks with their non-agency investments and hedging. “If this occurs in a significant manner, we could lower our ratings on a bank that is undertaking such activity,” the rating service said ...

Another fund participating in the Public-Private Investment Program terminated its investment period, suggesting the PPIP is less useful for investors in non-agency mortgage-backed securities than investing without the help of the Troubled Asset Relief Program. The Treasury Department recently announced that the RLJ Western Public-Private Investment Fund ended its investment period on July 15. Invesco’s PPIF made a similar announcement in September and ended its participation in the PPIP in April, leaving ... [Includes one chart]

The withdrawal of one of the biggest opponents to Bank of America’s pending $8.5 billion settlement with non-agency mortgage-backed security investors will not necessarily speed approval of the deal, according to industry analysts. Last month, the hedge fund Baupost (known as Walnut Place in the lawsuit) dropped its objections to the settlement and moved to sell some its holdings on Countrywide Financial non-agency MBS. A number of other entities continue to oppose the settlement, including AIG and ...

In response to criticism that the Home Affordable Modification Program is susceptible to fraud, the Treasury Department recently established a fraud detection program with unprecedented penalties for the non-agency portion of HAMP. In certain circumstances, the Treasury will recapture any servicer, borrower or investor incentive payments, even for loan modifications completed before the new fraud detection program was announced. The process was detailed in HAMP Supplemental Directive 12-04. The Treasury said it hired ...