Federal regulators suggest that a number of changes are under consideration for risk-retention requirements initially proposed in 2011. Two changes under consideration include a revision of the qualified residential mortgage definition and a possible alternative to the controversial proposed premium capture cash reserve account. Katherine Hsu, chief of the office of structured finance in the division of corporation finance at the Securities and Exchange Commission, said federal regulators are considering changing the proposed definition for QRMs due to the recent ability-to-repay rule from the Consumer Financial Protection Bureau that set requirements for “qualified mortgages.” The QRM standards cannot be any more broad than the QM standards. Speaking at the American Securitization Forum’s ASF 2013 conference last week in Las Vegas, Hsu also stressed...

The Department of Justice filed a civil action in Los Angeles this week against Standard & Poor’s Rating Services and its parent the McGraw-Hill companies for $5 billion, accusing S&P of defrauding investors by falsely representing that its ratings on certain collateralized debt obligations were “objective, independent and unencumbered by any conflicts of interest.” The Justice Department’s complaint alleges that S&P “knowingly and with the intent to defraud, devised, participated in, and executed a scheme to defraud investors” in its ratings of “trillions of dollars” of residential MBS and CDOs between 2004 and 2007. DOJ contends...

Stonegate Mortgage Corp. this month launched a new jumbo conduit, hiring Eric Schlotz, a 15-year veteran from GMAC-RFC in Minneapolis, to manage the operation. As for when the conduit might actually securitize loans, that’s a different matter. Schlotz told Inside MBS & ABS that securitization is not on the immediate drawing board, but will be an option for the future. “We anticipate whole loan sales and private deals,” Schlotz said. Asked whether he feels...

The presence of the “to-be-announced” market provides greater liquidity to the agency MBS sector, according to a recent study by the Federal Reserve Bank of New York. The study, “TBA Trading and Liquidity in the Agency MBS Market,” presents evidence on the liquidity of the TBA market during the financial crisis period. Its analysis also yields preliminary evidence that the liquidity of the TBA market raises MBS prices and lowers mortgage interest rates. Authors James Vickery and Joshua Wright said...

The securitization industry has successfully shot down high-profile attempts in San Bernardino County, CA, and in Chicago to use eminent domain to seize underwater, performing mortgages, write them down to fair market value and repackage them for sale to other investors. However, they’re not letting their guard down, as similar efforts continue in a number of other local jurisdictions throughout the country – most notably Brockton, MA, and Salinas, CA. In Brockton, the City Council recently voted 9-2 in favor of setting up a working group to further explore the concept. It also voted to invite a handful of local community activists and city officials, as well as a representative from Mortgage Resolution Partners – the architect of the proposal – to appear before the finance committee. The issue on their agenda is...

The investment period for the remaining funds participating in the Public-Private Investment Program ended during the fourth quarter of 2012, with four funds exiting the program during that time. The Treasury Department said it earned a profit from the PPIP, which focused on investment in non-agency mortgage-backed securities, and most of the individual funds also turned significant profits. “Our ability to aid in the stability of the MBS market and deliver solid investment ... [Includes one data chart]

Obama administration officials continue to claim that the administration is working toward a program to refinance or modify non-agency loans for borrowers with negative equity. Support in Congress for such a program is largely limited to Democrats, with the Obama administration suggesting that a non-legislative solution could be implemented. “We must expand streamline refinancing to families whose loans are not guaranteed by the government,” Michael Stegman, counselor to the Treasury ...

The Consumer Financial Protection Bureau’s ability to regulate nonbanks, particularly servicers, appears to be questionable due to a recent court ruling on President Obama’s use of “recess appointments.” The questions regarding the CFPB’s authority have been prompted by the U.S. Court of Appeals for the District of Columbia, which recently declared President Obama’s recess appointments to the National Labor Relations Board to be unconstitutional because the Senate was not technically ...

Assured Guaranty won a lawsuit this week against Flagstar Bank regarding a breach of representations and warranties on more than $900 million in non-agency mortgage-backed securities issued by Flagstar. Industry analysts suggest the ruling is significant as it is one of the first in favor of bond insurance companies trying to enforce breaches of reps and warrants, and U.S. District Judge Jed Rakoff endorsed many of the tactics they have used to seek buybacks, including ... [Includes two briefs]

The FHA this week has proposed to set a 95 percent maximum loan-to-value ratio for FHA-insured loans over $625,500, effectively raising the minimum downpayment for jumbo loans from 3.5 percent to 5 percent. In a Feb. 6 Federal Register notice, the FHA said the proposed change is aimed at improving the health of the Mutual Mortgage Insurance Fund, whose statutory capital reserve ratio has fallen to a precarious level, raising the specter of a taxpayer bailout. Despite steps taken since 2009 to strengthen the MMIF, actuarial reviews of the fund have projected rising levels ...