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Inside Nonconforming Markets

September 25, 2009

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Lenders Say New Standards for Non-Agency MBS Could Hinder Revival of Market

Any revival of the non-agency mortgage-backed security market will have to conform with new MBS rating guidelines issued by Standard & Poor’s last week. But lenders warn that the new guidelines are based on onerous assumptions about mortgage performance and point to an uncertain future for the subprime and Alt A markets. S&P said it expects the new criteria will provide more stability for... Read More

Democrats Abandon ‘Plain Vanilla’ Proposal

A controversial proposal to create a category of “plain vanilla” mortgages was dropped from consideration this week by Democrats in Congress and the Obama administration. Officials at the Treasury Department conceded that the proposal might have been heavy-handed but note that risky mortgages will still be addressed by the proposed Consumer Financial Protection Agency... Read More

Fed Expands Oversight of Some Subprime Lenders

The Federal Reserve last week moved to immediately begin consumer compliance supervision of non-bank subsidiaries of bank holding companies and foreign banking organizations. The Fed said the increased supervision was spurred by a lack of federal regulation of subprime lenders. The subprime units of Wells Fargo, Citi and HSBC, among others, are included in the new supervision... Read More

Legacy Loan Programs Progress Amid Uncertainty

The federal government is beginning to implement its Legacy Loan Program, but watchdogs question whether the Public-Private Investment Program will foster true price discovery and liquidity.Last week, the Federal Deposit Insurance Corp. completed a pilot sale of “troubled assets” and a mortgage-backed security version of the program is expected to commence at the end of this month... Read More

Jumbo HAMP Re-Defaults Expected to Be Low

Re-default rates on jumbo mortgages modified via the Home Affordable Mortgage Program could be half as large as subprime re-default rates, according to recent estimates by Moody’s Investors Service. Analysts suggest that jumbo delinquencies could moderate in early 2010 as servicers modify jumbo mortgages and home price declines level off. Analysts at Moody’s predict that 30 percent to... Read More

Expected Portfolio Lending Boom Short-Lived

After the collapse of the secondary market in 2007, portfolio lending was expected to increase markedly as lenders would be forced to hold onto non-prime originations. However, bank and thrift portfolios have remained relatively flat since the end of 2006, and non-prime lending remains dormant. According to a new ranking and analysis by Inside B&C Lending... [Includes one chart and one graph] Read More

HAMP Implementation ‘Slow and Spotty’

Borrowers continue to experience difficulties obtaining loan modifications under the Home Affordable Modification Program, according to a recent survey of housing counselors. Meanwhile, it remains unclear what percentage of HAMP mods are being made by non-prime servicers. An August survey by researchers at the University of North Carolina found that HAMP implementation has been... Read More

News Briefs

The Federal Deposit Insurance Corp. is encouraging its partners in a loss-share agreement with acquirers of failed insured depository institutions to provide... Moody’s Investors Service updated its approach to evaluating mortgage-backed securities to account for seasoned and non-performing collateral. The update eliminates... Read More

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