A subsidiary of Credit Suisse Group issued its second non-agency jumbo mortgage-backed security of the year last week. The transaction was backed by $425.09 million of jumbo mortgages, largely originated by MetLife Home Loans, which ceased originations at the beginning of this year. The privately-placed deal – CSMC Trust 2012-CIM2 – received AAA ratings from Standard & Poor’s and DBRS with credit enhancement of 8.25 percent on the AAA tranche. S&P also placed a AAA rating on CSMC Trust 2012-CIM1, the $741.94 million ...

Redwood Trust completed whole loan sales of jumbo mortgages during the second quarter of 2012, according to Mike McMahon, managing director of the real estate investment trust. Redwood also completed an issuance of a non-agency jumbo mortgage-backed security last week, the third of the year for the REIT. While Redwood’s two most recent non-agency securities have been backed by 30-year fixed-rate mortgages, the whole loan sales consisted of hybrid ARMs, according to McMahon. “We have completed some whole loan sales of ...

Delinquencies on home-equity loans increased in the first quarter of 2012 and industry analysts expect further increases even though first-lien mortgage performance has been improving. The top two holders of HELs have differing strategies on HEL originations, and some smaller banks are also pushing the products. The serious delinquency rate on HELs hit 2.83 percent in the first quarter of 2012, according to the Inside Mortgage Finance Bank Mortgage Database. Delinquencies increased 34.1 percent from the end of 2011 and ...

Loan modifications performed on mortgages in bank portfolios perform much better than mods on mortgages included in non-agency mortgage-backed securities, according to an analysis by Inside Nonconforming Markets of new data from the Office of the Comptroller of the Currency. The performance varies significantly even as the two types of non-agency mortgages receive the vast majority of principal reduction loan mods. The 12-month re-default rate on mods implemented from 2008 through the first quarter of 2011 was ...

Non-agency mortgage-backed security investors strongly oppose a proposal in California to reduce principal for borrowers with negative equity by acquiring mortgages via eminent domain. The proposal could set a troubling precedent according to non-agency MBS investors, who are still considering options to prevent such seizures. In June, San Bernardino County along with two cities in the county, Ontario and Fontana, approved a resolution that would allow the municipalities to acquire mortgages with negative equity using eminent domain ...

Subprime mortgage-backed securities offer returns of at least 10.0 percent per year for selective investors, according to Bill Roth, co-CIO at Two Harbors Investment. “We are able to assume the default of a significant portion of borrowers who are currently making their payments, assume a declining housing market and still be able to earn an attractive yield,” Roth said last week during a webinar hosted by the real estate investment trust. He added that home prices could decline by another 20 percent in the next year and ...

Compensation for non-agency mortgage-backed security servicers should be adjusted and the industry should adopt practices from commercial MBS servicing, according to Morningstar Credit Ratings. The firm that recently established its non-agency MBS rating capabilities said enhanced servicing could help revive the issuance of non-agency MBS. “Without these reforms it may prove very difficult to attract investors back into the fold of private-label residential mortgage securities given the weaknesses exposed in ...

The pending issuance by Redwood Trust of a $293.59 million jumbo non-agency mortgage-backed security appears to have been adjusted to address concerns about previous issuance by the real estate investment trust. The deal is set to receive AAA ratings from three rating services, more lenders contributed to the deal, and the concentration of loans in San Francisco was reduced. “The borrowers in this pool have high FICO scores, significant liquid cash reserves and equity in their properties, which are ...

Banks and thrifts increased their holdings of first-lien residential mortgages in the first quarter of 2012 compared with a year ago, according to the Inside Mortgage Finance Bank Mortgage Database. The 3.0 percent growth rate was partly due to originations of nonconforming mortgages, which helped offset portfolio runoff. Banks and thrifts held $1.74 trillion in first-liens in portfolio at the end of the first quarter. Among the top three bank portfolio lenders, only Wells Fargo ... [Includes one data chart]

Capital rules proposed by federal regulators last week for banks could have a significant impact on originations and holdings of non-agency mortgages and mortgage-backed securities. The changes are part of Basel III reforms. Non-bank special servicers have already started to increase their portfolios due to sales by banks getting a head start on complying with Basel III rules. Industry analysts warn that originations of “non-vanilla” mortgages will also be curtailed. “Following the qualified mortgage rules and ...