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Inside MBS & ABS

May 27, 2011

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Redwood Outlines MBS Structural Changes That Would Improve Pending Risk-Retention Rule on Securitization

Federal regulators should adopt a fair value method for measuring an MBS sponsor’s retained interest in non-agency transactions and make subtle changes in the proposed premium capture provisions in order to provide a framework that’s feasible for issuers, according to Redwood Trust officials. In a briefing with the Federal Housing Finance Agency, the company explained several key changes to the proposed inter-agency rule on risk retention as it would affect non-agency MBS. Redwood, the only company that has issued non-agency MBS backed by newly originated mortgages over the past few years, was joined by officials from Wells Fargo, which had been one of the most... Read More

REIT Plans Splash in Non-Agency MBS Market in ‘11, Says Sector is Opening Up

Two Harbors Investment Corp. announced last week that it has taken its first steps toward setting up a securitization issuance program, with a goal to issue a $250 million jumbo non-agency MBS sometime in 2011. The New York-based real estate investment trust will partner with Barclays Capital to close on a $100 million mortgage loan warehouse facility, which is subject to future increases. Two Harbors will buy prime, fixed-rate jumbo residential mortgages and aggregate them in the facility. It is currently targeting a $250 million deal size for the initial securitization. Barclays will act as underwriter, according to Two Harbors. The program is aimed at... Read More

CA Appeals Court Green Lights Class Action Against Countrywide, et al. Over Subprime MBS

The legacy of toxic subprime and Alt A MBS from Countrywide Financial continued to spread last week, with a California appeals court deciding to allow a class action involving a number of pension funds and other institutional investors against the lender to proceed. The plaintiffs allege that Countrywide and a number of its subsidiaries, officers and U.S. investment banks violated the Securities Act of 1933 by making materially false and misleading statements in over 450 prospectus supplements relating to the issuance of more than $300 billion in subprime and Alt A securities. Specifically, plaintiffs allege the defendants misrepresented the quality of... Read More

Thrifts Post Modest Increase in MBS Market in Early 2011, But OTS-Regulated Field is Shrinking

Savings institutions reported a total of $200.9 billion of residential MBS in their retained portfolios at the end of the first quarter of 2011, up marginally from the end of the previous year. But the heart of the industry – firms regulated by the Office of Thrift Supervision – actually posted a small decline in their MBS holdings during the period. The OTS itself is being phased out as a separate federal regulator, although the savings association charter will continue under the supervision of a dedicated unit in the Office of the Comptroller of the Currency. OTS-regulated thrifts held $157.6 billion of MBS in their portfolios at the end of... [Includes two data charts] Read More

Trade Groups Call for Private/Public Housing Finance Solution to Replace Fannie, Freddie

A trio of housing trade associations went to bat for the role of government-sponsored enterprises this week, but not necessarily for Fannie Mae and Freddie Mac, arguing that GSEs, as well as the government itself has a role in the reform of the housing finance system. During testimony this week before the Senate Banking, Housing and Urban Affairs Committee, representatives from the National Association of Realtors, the National Association of Home Builders and the National Multi Housing Council/National Apartment Association warned lawmakers that the current efforts to wind down Fannie and Freddie must not disrupt the already fragile housing and... Read More

NY AG to Investigate Banks’ Role in Financial Crisis As State Probes of MBS Practices Expand Further

Facing significant penalties from investigations by the Securities and Exchange Commission, Wall Street banks are bracing for investigations of their securitization activities by the influential New York attorney general’s office and other state regulators. NY Attorney General Eric Schneiderman has reportedly launched an investigation into the securitization processes of Bank of America, Morgan Stanley, Goldman Sachs, JPMorgan Chase, UBS and Deutsche Bank. All the parties declined to comment, but reports say that the AG is looking into how the banks securitized mortgage loans, as well as their other practices handling mortgage loans. Specific concerns have... Read More

Risk-Retention, QRM Proposals Could Hamper Return of Private Investors to Non-Agency Market

Pending inter-agency proposals to implement risk-retention requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act could undermine the return of private capital to the housing finance market, warned industry participants. Testifying this week during a House subcommittee hearing, the Mortgage Bankers Association and other critics of risk retention said that a narrow definition of a “qualified residential mortgage” and overemphasis on higher downpayment may have an adverse impact on credit availability. MBA Chairman Michael Berman told members of the House Financial Services Subcommittee on Insurance, Housing and Economic Opportunity that while... Read More

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