While originating loans that do not meet qualified-mortgage standards does pose litigation risk, many of the lenders willing to offer the loans to prime borrowers have established underwriting standards that minimize the risks while participating in a sector with less competition than the agency market. Mitch Hochberg, general counsel at Ethos Lending and a partner at Fenway Summer, estimated that non-QMs would account for at least 12.5 percent of originations in 2014, assuming a ...

The Consumer Financial Protection Bureau is considering allowing lenders that accidentally trip the debt-to-income ratio threshold for qualified mortgages to cure the mistake and maintain QM status for the loan. The 43 percent DTI ratio standard for QMs currently only applies to non-agency mortgages that aren’t eligible for sale to the government-sponsored enterprises. The limited right to cure DTI mistakes was proposed last week in conjunction with a proposal from the agency to ...

The Senate Committee on Banking, Housing and Urban Affairs is primed to resume its markup next week of legislation to reform the government-sponsored enterprises. While it remains unlikely that Congress will pass GSE reform legislation this year, industry participants of all sorts are working to change portions of the Senate bill. The markup last week was tabled after brief opening statements from Sens. Tim Johnson, D-SD, and Mike Crapo, R-ID, who are trying to ...

Issuers of non-agency mortgage-backed securities warn that the latest disclosure proposal from the Securities and Exchange Commission could completely shut down issuance of non-agency MBS. Since 2010, the SEC has been working on disclosure requirements for MBS and other structured finance products. The regulator was set to approve a final rule in February that would revise asset-level disclosure requirements under Regulation AB but instead re-proposed a portion ...

Radian Group announced this week that it plans to acquire Clayton Holdings for $305 million. Among other services, Clayton provides due diligence on non-agency mortgage-backed securities. Radian said the transaction is expected to close this summer and the firm expects to break even on the purchase this year. Radian said Clayton will continue to serve its existing clients, grow in its current operations areas and explore opportunities to market new ... [Includes eight briefs]

A number of underwriting characteristics for jumbo mortgages included in non-agency mortgage-backed securities shifted in the first quarter of 2014, according to an analysis by Inside Nonconforming Markets. And the decline in jumbo MBS activity during the quarter has prompted industry analysts to significantly reduce projections for issuance the rest of this year. Average credit scores declined, debt-to-income ratios increased and ... [Includes one data chart]

Issuers of jumbo mortgage-backed securities have been cagey about identifying the smaller lenders that have contributed mortgages to jumbo MBS. However, Inside Nonconforming Markets has uncovered 93 lenders that participated in deals issued in the first quarter of 2014. The lenders whose loans were included in jumbo MBS in the first quarter were largely small firms that don’t attract much attention. Most of the lenders participating in jumbo MBS ... [Includes two data charts]

A number of lenders have loosened their underwriting standards on non-agency products in recent months in an effort to boost originations as demand for refinances plummets. One of the boldest moves was taken by TD Bank, which this week announced a portfolio loan that has a downpayment requirement as low as 3 percent. The loan is part of the lender’s Right Step mortgage program which features low downpayment loans without private mortgage insurance ...

Officials at Hatteras Financial revealed this week that the real estate investment trust plans to purchase jumbo adjustable-rate mortgages from lenders, branching out from a focus on investing in agency mortgage-backed securities. Hatteras recently established a flow program to purchase agency ARMs from 10 lenders. Michael Hough, the REIT’s CEO, said the program offers lenders an alternative to selling ARMs to the government-sponsored enterprises and ...

Kroll Bond Rating Agency, one of the most commonly used rating services for jumbo mortgage-backed securities in recent years, released its criteria this week for jumbo MBS that include mortgages subject to the Consumer Financial Protection Bureau’s ability to repay rule. The criteria from KBRA is similar to criteria from the other rating services, with higher credit enhancement requirements for certain loans that don’t meet the CFPB’s standards for qualified mortgages ...