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Inside MBS & ABS

January 17, 2014

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Fannie Sticks With the Mold on Latest Risk-Sharing Transaction, Doubts Creep in About Non-TBA Deals

Fannie Mae this week priced its second capital markets risk-sharing transaction, offering a total of $750 million in tranches for sale based off a reference pool of $29.31 billion in agency mortgages. The deal uses the same synthetic structure seen on previous risk-sharing transactions from the government-sponsored enterprises. Edward DeMarco, the former acting director of the Federal Housing Finance Agency, had been pushing the GSEs to issue risk-sharing deals using a senior-subordinate structure that would not be eligible for the to-be announced market. With Mel Watt now the director of the FHFA, non-TBA risk-sharing transactions from the GSEs could be even less likely. Laurel Davis, vice president for credit risk transfer at Fannie, said... Read More

NY Court Finds that Statute of Limitations for Reps and Warrants on Non-Agency MBS Starts Ticking at Issuance

The statute of limitations for filing representation-and-warranty claims on non-agency MBS starts when a deal is issued, not when a defective loan isn’t cured, according to a recent ruling by the appellate court in New York. Industry analysts suggest that the ruling will limit rep-and-warrant claims on vintage non-agency MBS as well as future claims on recently issued jumbo MBS. In December, the appellate division of New York’s Supreme Court dismissed ACE Securities Corp. v. DB Structured Products. The lawsuit was brought by a trustee on behalf of investors against Deutsche Bank, the issuer of ACE 2006-SL2, a non-agency MBS issued in 2006. The investors, along with HSBC Bank, the trustee, were looking to enforce rep-and-warrant claims in 2012. New York imposes... Read More

Agency MBS Production Dropped Sharply in Late 2013, Industry Heavyweights Drop Market Share

Agency single-family MBS issuance continued to decline as 2013 came to a close, with production in December dropping to just $75.77 billion – the lowest monthly total since July 2011, according to a new Inside MBS & ABS ranking and analysis. Agency MBS production declined steadily last year after peaking in April. For the year, total issuance was down 7.1 percent from 2012, and issuance plummeted 34.1 percent from the third to the fourth quarter. The biggest factor in the decline was...[Includes two data charts] Read More

Market Expected to Easily Absorb Auction Of ING’s Vintage Non-Agency MBS

The Dutch State Treasury Agency this week is auctioning $4.3 billion in non-agency MBS once held by ING, which will leave the government entity still holding about $2.2 billion of securities. The sale represents less than 1.0 percent of outstanding non-agency MBS, and it was expected to have little impact on pricing for these assets. Bids on the portfolio were... Read More

Lack of Secondary Market Will Keep Many Lenders, Large and Small, From Originating Non-QM Loans

The absence of a ready secondary market for mortgages that don’t fit into the safe harbor or rebuttable presumption categories of a qualified mortgage under the Consumer Financial Protection Bureau’s ability-to-repay rule is discouraging mortgage lenders of all sizes from originating non-QMs – at least in the initial phase of the rule’s implementation. “A common question we’ve received … is whether we plan to write non-QM loans,” William Emerson, CEO of Quicken Loans, said before the House Financial Services Subcommittee on Financial Institutions and Consumer Credit during a hearing this week on the effect of the CFPB’s new rule. “I can tell you categorically that Quicken Loans, like the overwhelming majority of lenders, will not lend outside the boundaries of QM. “In fact, even if we wanted to, we wouldn’t be able... Read More

Analysis: Volker Rule to Have Limited Impact on Most Securitizations; Re-REMICs Could Be Negatively Affected

The long-anticipated final implementation of the so-called Volcker rule this spring will have a limited impact on securitized products, according to a recent report by Barclays. A requirement of the Dodd-Frank Act to prohibit banking entities from engaging in proprietary trading and making investments with private-equity funds and hedge funds, the Volcker rule was finalized by five federal regulators last month and becomes effective April 1, 2014. Banks should expect... Read More

Japan, Russia Reach Out to Ginnie Mae for Help In Creating Robust Mortgage Securities Programs

Ginnie Mae is helping Japan and Russia as they shift from antiquated secondary mortgage market structures to ones modeled after the agency’s successful securities program. On Jan. 9, Ginnie Mae President Ted Tozer and President Shinya Shishido of the Japan Housing Finance Agency signed a joint memorandum of understanding to exchange information and facilitate discussions regarding Japan’s plan to adopt a Ginnie Mae-style securitization program. Japanese Prime Minister Shinzo Abe has directed... Read More

Non-Prime Lender Citadel Hopes to Be A $1 Billion Securitizer – Eventually

Citadel Loan Servicing, arguably the largest active originator of nonprime mortgages, plans to move forward with its first non-agency MBS by the middle of this year. Company founder and CEO Dan Perl told Inside MBS & ABS that the firm has already picked a custodian as well as what he calls a “watchdog” to review the collateral. The watchdog in question appears to be Clayton Holdings, said one source, but officials at both firms would not discuss the matter. Perl declined... Read More

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