Residential lenders reported a gradual increase in interest-only originations as 2013 progressed, despite a decline in total production.

The tapering of the Federal Reserve’s quantitative easing beginning this month will do little to end the advantages agency MBS have over new jumbo MBS.

Western Bancorp said it will lend to borrowers with credit scores as low as 620 and the loans are available to non-owner-occupied properties and first-time homebuyers.

Through the first nine months of 2013, an estimated 22 percent of the $1.59 trillion in mortgages originated (including second liens) had non-agency execution.

While activity plummeted in the second half of the year, jumbo MBS production in 2013 was nearly four times the level from the previous year.

While banks have put an emphasis on originating jumbo mortgages for portfolio, the uptick in total mortgages outstanding was largely driven by originations of agency mortgages.

Ratings on servicer advance asset-backed securities issued by Home Loan Servicing Solutions and Nationstar Mortgage could be downgraded due to a change in rating criteria by Standard & Poor’s that was implemented after the ABS were issued.

“The recent decline in large-lender share of the primary market is temporary, and principally a result of cyclical factors that caused larger lenders to pull back from the market,” said Fannie Mae's Gerry Flood.

Some 44 percent of mods on portfolio loans by eight large banks and thrifts include principal reduction in the third quarter of 2013.

Issuance of jumbo MBS was strong in 2013 until interest rates started to rise in May due to concerns that the Federal Reserve was set to taper its stimulus efforts.