A subprime mortgage-backed security of seasoned mortgages was rated as AAA by Standard & Poor’s last week, prompting complaints and comparisons to S&P’s recent downgrade of the rating for the U.S. government. S&P notes that the securitization by Springleaf Financial includes a number of unique characteristics and that sovereign ratings are not directly comparable with MBS ratings. S&P assigned AAA ratings to a portion of Springleaf’s $496.86 million subprime MBS. The AAA tranches had an exceptionally high 41.15 percent credit enhancement and more than 98.0 percent of the mortgages in the deal are current, according to S&P. ...

One of PennyMac Mortgage Investment Trust's primary goals is to increase jumbo correspondent lending activity, according to David Spector, president and COO of the real estate investment trust. Stanford Kurland, chairman and CEO of PennyMac, noted that banks have reduced correspondent activity due to impending risk-retention rules and other regulatory issues. “PennyMac has great potential to bridge the significant gap that exists in the origination market, which will likely grow with the expansion of the prime non-agency market as the agencies’ conforming loan limits are reduced,” Kurland said this month. ...

After negotiations related to losses deadlocked, American Home Mortgage Servicing this week filed a lawsuit against Lender Processing Services and its affiliate, DocX. The non-prime servicer is seeking to recover losses from LPS relating to faulty assignments of non-agency mortgages set for foreclosure. The lawsuit follows more than a year of negotiations between the companies as American Home attempted to recover millions of dollars in losses. LPS said it was surprised by the lawsuit and that American Home had refused to provide evidence of actual losses suffered. ...

Non-agency mortgage-backed security investors frustrated with the lack of buybacks on non-agency MBS are being encouraged to explore servicer termination. The tactic is less expensive and less burdensome than researching potential buybacks, according to Steve Ruterman, an independent consultant to non-agency MBS investors.“While much of the focus in recent years has been on enforcing put-back rights, there has been talk of broader efforts to replace servicers,” he said. “Creditors would be wise to make better use of this complementary strategy going forward.” ...

Preparations for a hoped-for return of non-agency jumbo origination and securitization have taken a financial toll on Redwood Trust, according to officials at the real-estate investment trust. “We have built our origination businesses for more volume than is currently available on the right terms,” Redwood officials said last week as part of their earnings release for the second quarter of 2011. “We believe our scale will ultimately pay off. For now, however, our operating costs are high relative to the net revenues we can earn off our invested capital without taking ...

Mortgage industry veteran Lewis Ranieri says big banks will easily dodge the risk-retention requirements for mortgage securitizers that have been proposed by federal regulators. Issuers of non-agency mortgage securities that aren’t backed by “qualified residential mortgages” would have to retain a 5 percent interest in the transaction. In a joint comment letter submitted by Ranieri and Kenneth Rosen, chairman of Rosen Consulting Group, a real estate research firm, the pair warned that risk retention as proposed will benefit ...

Two Harbors Investment Corp. said this week it is “impressed with the investment opportunities” in the non-agency MBS sector, particularly over the next year and beyond and is pushing forward with its plans to begin a securitization program. Thomas Siering, president and CEO of the New York-based real estate investment trust, said during a conference call to discuss the firm’s second quarter earnings that despite the “challenging” non-agency environment in June, there is tremendous opportunity to profit from non-agency MBS issuance throughout the rest of this year into 2012. “The recent pullback in the non-agency market has created...

Equipment and automotive ABS issuance may flirt with new record highs this year or next as the 2008 market collapse fallout dissipates and the benefits of solid underwriting continue to accrue, some leading industry executives said this week. Equipment ABS has rebounded substantially, according to Julie Schlueter, who is responsible for issuance of structured products and unsecured bonds at Case New Holland Global, a major manufac-turer of agricultural and construction equipment, and its captive finance subsidiary, CNH Capital. In 2007, new issuance in the sector exceeded ...

While industry participants continue to debate the merits of high downpayment standards for qualified residential mortgages, the risk-retention treatment of seasoned securities and loans is also a major concern. In comment letters submitted to federal regulators, the American Securitization Forum and the Securities Industry and Financial Markets Association each called for time limits on the proposed risk retention required for non-QRMs. Under the current risk-retention proposal, SIFMA said financial institutions would be compelled to ...

Bucking a trend among non-agency players, Walter Investment Management last week ceased operating as a real estate investment trust. While a number of non-agency REITs have formed recently, with more likely going forward, most are focused on investments in non-agency mortgage-backed securities. Walter, meanwhile, emphasizes non-prime third-party servicing. The company dropped its REIT status after its acquisition last week of Green Tree Credit Solutions. Walter officials said the company’s REIT status had put the company at ...