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Inside Nonconforming Markets

September 12, 2008

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Subprime Portfolios Shrink in 2Q As Loss Mit Struggles Continue

With subprime originations few and far between since the second half of 2007, servicers have had plenty of opportunities to focus on loss mitigation. And the mortgage industry, led by the Hope Now Alliance, has touted its efforts to help troubled borrowers. Subprime loan modifications continue to increase, but subprime foreclosures are also on... [Includes one chart] Read More

GSE Affordability Focus Not Expected to Reach Subprime

The federal government said Fannie Mae and Freddie Mac will focus, in part, on affordability, while under conservatorship. The government-sponsored enterprises are expected to loosen their credit score and loan-to-value ratio requirements, but analysts suggest that the parameters will not fall to subprime-levels. Still, the federal government’s move to help stabilize the housing market... Read More

FHA’s Past Actions a Concern For Refi Plan Participants

Participants in the FHA’s impending refinance program for troubled borrowers “do not want to be the ‘chumps’ to whom FHA reallocates the risk of loss,” according to Larry Platt, financial services practice area leader at K&L Gates. He said the FHA’s practice of reallocating the risk of loss on delinquent loans to lenders, as well as its power to protect itself from adverse selection in the... Read More

Lenders Ask Fed to Delay HOEPA Changes Until 2010

A coalition representing most of the mortgage industry recently called on the Federal Reserve Board to delay the effective date for tougher rules aimed at subprime mortgages until Jan. 1, 2010. Recently revised “high-cost loan” reporting and regulations under the Home Mortgage Disclosure Act and Home Ownership and Equity Protection Act are generally scheduled to take effect on... Read More

Subprime Implosion Detailed In 2007 HMDA Data

Rate-spread loans accounted for 18.3 percent of all mortgages made in 2007, down from 28.7 percent the previous year, according to data released this week by the Federal Reserve. However, the falling subprime share could be overstated, as a number of subprime lenders that went out of business during the year failed to report data.Rate-spread loans are the Fed’s proxy for subprime as reported... Read More

Ocwen Touts Subprime Servicing ‘Ray of Hope’

Delinquency rates declined or remained flat at Ocwen Financial this summer, prompting the servicer to suggest that the results represent a “ray of hope in the subprime crisis.” The flattening is the first sign of stability in Ocwen-serviced loans since subprime troubles mounted in 2007. However, Ronald Faris, Ocwen’s president, cautioned that the sector’s troubles are far from... Read More

‘Significant’ Amount of AA Subprime MBS Could Default

As losses on subprime mortgage-backed securities wind down, the vast majority of AAA subprime MBS are expected to withstand losses. However, Standard & Poor’s recently warned that AA subprime MBS are “on the cusp” of the loss threshold, with significant defaults expected. “In our view, there is a reasonable chance that a significant proportion of those tranches could default,” said... Read More

Credit Suisse Employees Face Lawsuit for CDO Scheme

Two Credit Suisse employees allegedly improperly purchased more than $1.0 billion in subprime mortgage-backed security-related bonds, according to a lawsuit filed by the Securities and Exchange Commission this month in federal court in Manhattan. The SEC’s complaint alleges that from at least February 2005 through August 2007, Julian Tzolov and Eric Butler, brokers... Read More

SEC Faces Opposition on Rating Service References

A proposal by the Securities and Exchange Commission to reduce references to rating services in various rules was met with opposition from the securities industry, lenders and Standard & Poor’s. The SEC proposed changes to its rules in July and comments were due earlier this month. A total of 44 SEC rules and forms currently include references to credit ratings and nationally... Read More

B&C News Briefs

Goldman Sachs and Banco Popular recently announced an agreement under which Popular will sell... Markit this week announced that on Oct. 2 it will launch an ABX index based on subprime originations... Bear Stearns this week agreed to pay $28 million to settle Federal Trade Commission charges... Countrywide Financial this week notified some of its borrowers that... Read More

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