Subprime borrowers opted for adjustable-rate mortgages during the last boom due to economic considerations, not because of a lack of financial sophistication, according to new research published by the Federal Reserve Bank of San Francisco. The Fed researchers found that even accounting for house price appreciation, subprime borrowers were at least as sensitive to changes in loan pricing and other interest-rate related fundamentals as borrowers with credit scores of 760 and above. The findings were detailed in ...

More than $85 million in peer-to-peer mortgages were originated in 2013 via National Family Mortgage, according to the firm. The company facilitates real-estate lending between family members. NFM said it is on pace for $150 million in originations this year. The firm said its originations can be more affordable than mortgages from traditional lenders. In addition to using NFM to facilitate a home purchase, some borrowers have refinanced from a traditional mortgage into a family-funded loan ... [Includes one brief]

It is not a matter of “if” or even “when” but rather “how” the remaining defendants settle lawsuits filed by the Federal Housing Finance Agency over billions in non-agency MBS sold to Fannie Mae and Freddie Mac in the years leading up to the housing crisis. Last week, the FHFA announced it recovered $7.88 billion in civil settlements in 2013 from seven of the 18 defendants the agency took to court in 2011. Eleven firms have yet to settle, with Bank of America facing the largest exposure because of its ownership of Countrywide Financial Corp. and Merrill Lynch, two of the largest issuers in the now-defunct subprime MBS market. In its original claim, the conservator of Fannie and Freddie accused...[Includes one data chart]

Just three jumbo mortgage-backed securities were issued in the fourth quarter of 2013, according to a new ranking and analysis by Inside Nonconforming Markets. During the second quarter of the year, one deal was issued every week, on average. Investor demand for jumbo MBS plummeted after interest rates started to increase in May. A number of the deals that were completed in the second half of the year received minimal attention from investors, with at least one planned issuance scrapped ... [Includes one data chart]

Mel Watt, the incoming director of the Federal Housing Finance Agency, appears to be taking a less aggressive stance toward decreasing the government-sponsored enterprises’ dominance of the mortgage market than Ed DeMarco, the acting director of the FHFA. The FHFA in December announced changes to GSE mortgage-backed security guaranty fees that would amount to an average increase of approximately 11 basis points, to be implemented in March and April ...

The Federal Housing Finance Agency said in December that it would wait until at least October before setting new “purchase limits” for Fannie Mae and Freddie Mac. The regulator of the two government-sponsored enterprises is considering establishing purchase limits below the statutory conforming loan limits. In the highest-cost markets, the biggest loan the GSEs could buy would be $600,000, instead of $625,500. The national purchase limit would be $400,000, roughly 4 percent below the $417,000 conforming ...

Originations held in bank portfolios couldn't outpace portfolio runoff, according to a new ranking and analysis by Inside Nonconforming Markets. The dollar volume of first liens in bank and thrift portfolios declined by 0.6 percent in the third quarter of 2013 compared with the previous quarter. Total residential mortgages outstanding increased by a scant 0.1 percent during that time, the first quarterly increase in total mortgages outstanding since early 2008. While banks ... [Includes one data chart]

Non-agency mortgage originations are expected to remain relatively strong in 2014, led by bank jumbo production and an expected resumption of issuance of non-agency mortgage-backed securities. Through three quarters in 2013, an estimated 22.4 percent of the $1.59 trillion in mortgages originated (including second liens) had non-agency execution, according to affiliated publication Inside MBS & ABS, with most of the non-agency activity concentrated in bank portfolios. Total mortgage originations ...

The Federal Reserve’s asset purchases will continue to dominate execution of jumbo mortgage-backed security issuance until the significant purchases of agency MBS are stopped, according to analysts at Bank of America Merrill Lynch. The tapering of the Fed’s quantitative easing beginning this month will do little to end the advantages agency MBS have over new jumbo MBS. “We believe that the Fed’s ‘non-economic’ bid for agency MBS contributes to the distorted price advantage for agency MBS ...

The qualified mortgage requirements set to be implemented next week present jumbo lenders with opportunities as well as compliance challenges, according to industry participants. “We are particularly bullish about the jumbo mortgage business because we believe that multiple regulatory and competitive factors provide strong tailwinds to our business,” Greg Garrabrants, president and CEO of BofI Holdings, said during a recent investor presentation. He said the debt-to-income ratio requirements ...