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Inside MBS & ABS

May 8, 2015

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Agency MBS Activity Springs to Life in April As Purchase-Mortgage Volume Begins Growing

The agency MBS market in April had its strongest month of new issuance in 20 months thanks to the combination of strong refinance volume and a surge in purchase-mortgage lending. A new Inside MBS & ABS analysis and ranking reveals that Fannie Mae, Freddie Mac and Ginnie Mae issued a total of $121.10 billion of new single-family MBS last month, an increase of 22.1 percent from March. It marked the strongest output since August 2013, when new agency MBS was tapering off from a huge influx of refinance business. Refinance loans continued...[Includes two data charts] Read More

Strong Support from AAA Investors for New Stop- Advance Feature in Redwood’s Latest Jumbo MBS

A unique stop-advance feature included in the jumbo MBS issued by Redwood Trust late last week was viewed favorably by investors, according to officials at the real estate investment trust. “We are pleased not only with the pricing execution on this transaction, but also with the level and depth of AAA investor interest,” Marty Hughes, Redwood’s CEO, said this week. The $356.45 million Sequoia Mortgage Trust 2015-2 included... Read More

Study Suggests Big Banks Targeted Refinancing Efforts on Loans in Agency MBS Sold to Fed

Big banks in recent years likely focused their refinance efforts on loans in agency MBS that had been purchased by the Federal Reserve, according to a working paper by economists at the Fed. John Kandrac and Bernd Schlusche noted that agency MBS held by the Fed exhibit faster prepayment rates than MBS held by the rest of the market. While some analysts have pinned the prepayments on refi activities by nonbanks, the Fed economists said they found that Bank of America, Citigroup, JPMorgan Chase and Wells Fargo played a large role in the high prepayment rates for agency MBS purchased by the Fed. The economists noted... Read More

GSEs Focus on ‘Less-Liquid’ Assets in Trimming Retained Portfolios During First Quarter of 2015

Fannie Mae and Freddie Mac continued to follow orders and prune their retained investment portfolios – and potential future income – during the first quarter of 2015. But the government-sponsored enterprises ended the period holding more of their own MBS than when it started. The combined Fannie/Freddie mortgage investment portfolio fell 0.5 percent during the first quarter of 2015. Under their conservatorship agreement, each GSE is required to reduce its mortgage portfolio to $250 billion by the end of 2018. They each have a little over $150 billion more to go and, as of the end of March, 15 quarters to do it. The Federal Housing Finance Agency has directed...[Includes one data chart] Read More

Mortgage Investing REITs Prepare for Slower Prepayments as Rates Rise, MBS Prices Fall

The stock market hasn’t been treating real estate investment trusts that buy MBS very well of late, but there could be better news on the horizon: prepayment rates on the securities they own are coming down. As Barclays noted in a recent report: “Prepays fell for most cohorts, led by recent vintage 3.5s and 4s.” The investment banking firm added: “Next month, we expect speeds to remain mostly stable as seasonal factors and a 12 basis point rally in driving rates (3.83 percent vs 3.95 percent) helps offset another one-day drop in day count (20 days vs 21 days).” Several mREITs tracked... Read More

CMBS Delinquencies Hit Post-Recession Low, but Sector Not Out of the Woods Yet; REO Dispositions Take Longer

Delinquencies on commercial MBS hit a post-recession low in January before inching up 10 basis points to 4.72 percent the next month, according to figures compiled by Fitch Ratings Service. Then again, Fitch appears to be mostly bullish on the sector, noting that the uptick in late payments was caused by a change in its methodology and that under the old rules delinquencies would have fallen to 4.55 percent. The ratings change excluded deals backed by wireless towers, outdoor advertising and what it calls “certain other non-traditional transactions.” Hotel collateral has... Read More

Despite Regulatory Concerns, PACE Programs Continue to be Regarded as Viable Funding Choice

Despite the Federal Housing Finance Agency’s misgivings about Property Assessed Clean Energy programs, ABS issuers are finding investors for deals backed by these loans. Since March 2014, three rated residential ABS transactions and one private unrated commercial deal backed by PACE assessments have been issued for a combined total of $503.65 million. All three residential ABS deals were rated “AA,” with average assessments totaling $59,628. The PACE program was launched in 2008 by the city of Berkeley, CA, as a pilot to promote energy efficiency in residential, commercial, agricultural and industrial properties... Read More

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