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Inside Nonconforming Markets

May 14, 2010

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Redwood Hoping to Revamp Jumbo Market With a Focus on Protecting AAA Investors

The recent jumbo mortgage securitization sponsored by Redwood Trust was an attempt to simultaneously restart and revamp the secondary market, according to executives at the company. Brett Nicholas, Redwood CIO and co-CEO, said Redwood is ultimately looking to enhance the non-agency mortgage-backed security market to protect investors. Going forward, the securitization... Read More

Redwood’s Views on Risk Retention

In its recent securitization, Redwood retained a 5.0 percent vertical slice of the senior class of the security along with four subordinate classes that equal 6.5 percent of the total pool. That level of risk retention is excessive, according to executives at the company, who noted that Redwood would not usually retain the vertical slice... Read More

Senate Looks to Diminish Alternative Mortgages

The Senate this week approved amendments to financial reform legislation that would exempt “qualifying” traditional mortgages from mandatory risk retention and establish strong underwriting standards for mortgages. The amendments were tacked onto S. 3217, the Restoring American Financial Stability Act of 2010. Mortgages that meet minimum underwriting... Read More

FDIC Moves Forward on Risk Retention Proposal

The board of the Federal Deposit Insurance Corp. this week approved a proposed rule which would require banks to retain a portion of the risk in mortgage securities they issue in order for the transaction to qualify for the FDIC’s safe harbor, which protects investors if the issuer is put in receivership. On a 3-2 vote, the FDIC approved a proposed rule that also... Read More

Fannie Tightens ARM, IO, Balloon Underwriting

Fannie Mae further tightened its underwriting standards for ARMs with initial periods of five years or less, interest-only mortgages and balloon mortgages. For ARMs with initial periods of 5 years or less, Fannie will require that borrowers be qualified at the greater of the note rate plus 2 percent or the fully indexed rate. For IOs, the maximum... Read More

Non-Prime Mortgages Continue to Haunt GSEs

While Fannie Mae and Freddie Mac stopped acquiring non-prime mortgages in 2008, subprime and Alt A loans continue to account for a large portion of the government-sponsored enterprises’ losses. Combined, Fannie and Freddie had $390.40 billion in non-prime mortgages on their books, both through purchases and securitizations under their... [Includes one chart and one graph] Read More

Ocwen Hits Mod and Portfolio Growth Issues

Ocwen Financial has been a leader on non-prime modifications, but company officials warned last week that it will be difficult to sustain that pace – at least in the near term. The special servicer completed 19,612 modifications in the first quarter of 2010, 68 percent of which were completed outside of the Home Affordable Modification Program... [Includes one graph] Read More

Non-Agency Servicers Boost Short Sales, Eye HAFA

Short-sale activity in the non-agency sector was on the rise even before the expected boost from the Home Affordable Foreclosure Alternatives program. And analysts at Moody’s Investors Service suggest that non-agency servicers and investors will benefit from the short sale portion of the Home Affordable Modification Program.“The monetary incentives and the... Read More

News Briefs

Serious delinquencies on Alt A mortgage-backed securities declined on a monthly basis in April... PennyMac Mortgage Investment Trust had $1.3 million in net income for the first quarter of 2010... Of the 53 banks surveyed by the Federal Reserve which offered prime mortgages, fewer than four... Moody’s Investors Service continued to downgrade non-agency MBS, including action on... Read More

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