Issuance of conduit commercial MBS has been significantly lower than expected this year, according to Bank of America Merrill Lynch. Some of the expected volume appears to have shifted to single-asset deals, while a number of investor-related factors have also likely limited issuance. BAML expected $85.0 billion in conduit commercial MBS to be issued this year, a nearly 50 percent increase compared with 2014. However, just $23.0 billion in conduit commercial MBS had been issued this year through mid-May, suggesting that volume might stay level compared with 2014. A number of factors have shifted...
The Senate Banking, Housing and Urban Affairs Committee approved a Republican regulatory relief bill on a strictly partisan vote late this week, with all of the mortgage-finance provisions previously reported intact. Sen. Pat Toomey, R-PA, momentarily offered Fannie Mae and Freddie Mac a “get out of jail free” card, in the form of an amendment addressing capital requirements for the two government-sponsored enterprises, then withdrew it, presumably for use at a future point in time. “This is...
Industry participants, both on their own and with help from the Treasury Department, continue to work on reforms to attract investors to buy new non-agency MBS. Servicing standards will likely play a key role in the reforms, though progress has been slow. The Structured Finance Industry Group published its first RMBS 3.0 “green paper” in August 2014 with a follow-up in November. The Treasury Department has been working with industry participants toward the issuance of a benchmark non-agency MBS since at least September 2014. Analysts at Fitch Ratings stressed...
In April, the average daily trading volume in agency MBS fell to $187.8 billion, the worst reading of the year and a possible harbinger of problems to come. One market participant, speaking under the condition his name not be used, likened it to MBS buyers “going on strike.” He added: “Right now, you have an illiquid market, and that’s not a good thing.” In December of last year, the MBS trading volume was...
The mortgage market faces a big challenge when the Federal Reserve figures out how to unload its massive $1.7 trillion portfolio of agency MBS, but anticipated widening of spreads could at least improve market liquidity. The fixed-income market has seen a sharp decline in trading volume resulting in part from regulatory issues, said Mike Fratantoni, chief economist at the Mortgage Bankers Association, during the group’s annual secondary market conference in New York this week. “Banks have been hoarding liquidity instead of providing it to the market,” he said. Average daily trading volume of MBS has dropped...
Officials involved in the development of the common securitization platform and the single, interchangeable MBS for Fannie Mae and Freddie Mac have vowed not to publicize any timetable for the project. And despite several attempts to get an answer during a panel session at this week’s secondary market conference sponsored by the Mortgage Bankers Association, they stuck to their plan. They went out of their way to stress that they haven’t forgotten about potential non-agency users sometime down the road. But that’s...
In a ruling that may impact future fair-lending class actions, a federal district court judge in Manhattan has denied class certification in a lawsuit brought by the American Civil Liberties Union and National Consumer Law Center against global investment bank Morgan Stanley. Filed in October 2012, the suit was brought on behalf of African American borrowers in Detroit who obtained subprime loans from New Century Mortgage, a now-defunct originator that sold the loans to secondary-market purchasers, including Morgan Stanley, which then securitized them. New Century originated...
Separate lawsuits against major banks were dismissed last week, providing some insight on how lenders and servicers can defend against claims brought by consumer advocates under the False Claims Act and allegations of redlining and reverse redlining. In 2013, Advocates for Basic Legal Equality alleged that U.S. Bank’s servicing practices violated the FCA. U.S. District Court Judge Jack Zouhary dismissed the lawsuit, noting that the claims were barred by the “public disclosure doctrine.” Larry Platt, a partner at the law firm of K&L Gates, said...
The noise over regulatory relief legislation is getting louder. Over the past week, Republicans in the Senate issued a clarification of sorts about their draft legislation, Democrats came up with a narrower alternative and the industry weighed in as the Senate Banking, Housing and Urban Affairs Committee prepared for a markup scheduled for late this week. A noteworthy provision in the Democrats’ proposal would extend qualified-mortgage status for loans originated and held in portfolio – but only if the depository institution has less than $10 billion in assets. The GOP bill would extend this safe harbor to all banks, thrifts and credit unions. The Democratic proposal would bar...
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