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Inside Nonconforming Markets

October 23, 2009

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Industry Groups Say HAMP Doesn’t Fix Problems Facing IOs, Option ARM Loans

Servicers are urging the Treasury Department to adjust the Home Affordable Modification Program so it can better accommodate borrowers with interest-only mortgages and option ARMs, whose biggest problem may be negative equity in the home, and to provide more flexible modification structures such as interest-only payments. Bank of America, JPMorgan Chase, Wells Fargo, and Litton... Read More

Preemption Included in CFPA Bill Sent to House

The House Financial Services Committee this week approved legislation to increase oversight of lenders, including limited federal preemption of state laws. Mortgage industry representatives warn that a lack of total preemption requires lenders to follow a patchwork of state laws while state regulators warn that the bill’s preemption will allow abuses by lenders. The committee approved... Read More

Servicers Struggle to Convert HAMP Trial Mods

The first wave of borrowers who received trial modifications via the Home Affordable Modification Program are due to be converted into permanent mods. However, servicers report that many borrowers are not providing the required documentation. As of Sept. 1, only 1.26 percent of HAMP modifications had become permanent after the anticipated three-month trial period, according to a... Read More

Alt A MBS Seen as Best PPIP Investment

Of all collateral eligible for purchase via the Public-Private Investment Program, only select Alt A mortgage-backed securities offer the yields required by funds participating in the program, according to analysts at Barclays Capital. The nine funds participating in the PPIP will be able to purchase up to $40 billion in outstanding MBS. Securities eligible for purchase by the funds... Read More

Depository Institutions, CA, Top High-Rate Lending

Depository institutions accounted for the majority of higher-priced lending in 2008, though not necessarily by choice. Meanwhile, California remained the top state for high-rate originations last year, though by a much smaller margin than in previous years. An Inside B&C Lending analysis of new data reported under the Home Mortgage Disclosure Act reveals... [Includes one chart and one graph] Read More

Fannie Offers Incentive for Investor Forbearance

Servicers can receive $200 for implementing a forbearance plan for borrowers who do not qualify for the Home Affordable Modification Program via an option announced this week by Fannie Mae. The Payment Reduction Plan even applies to non-owner occupied properties. With a PRP, a servicer can reduce a borrower’s monthly principal and interest payment by up to 30 percent for up to... Read More

Fitch Stops Rating Alt A MBS Re-Securitizations

Fitch Ratings last week extended its moratorium on rating certain mortgage-backed security re-securitizations to include all Alt A collateral. The move is likely to put a damper on what was the sole bright spot for non-agency MBS issuance this year. The third quarter of 2009 ranked as one of the best three-month periods on record for issuance of non-agency MBS... Read More

Investors Caution Servicers on REO Rentals

While real-estate owned rental programs have been touted as a way for servicers to extract more value from a property than a distressed foreclosure sale, analysts at Moody’s Investor’s Service warn that the programs are unfair for some mortgage-backed security investors. Ideally, REO rental programs produce rental income and give servicers the option of selling the property at a later... Read More

News Briefs

Last week Arnold Schwarzenegger, the Republican governor of California, signed legislation to prohibit negative amortization on higher-priced mortgages originated in... JPMorgan Chase, Credit Suisse and Morgan Stanley this month agreed to a $100 million settlement regarding former subprime lender American Business Financial Services... Read More

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