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Inside Nonconforming Markets

June 25, 2010

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Obama to Sign Bill That Aims to Ban Previous Subprime Lending Practices

The House and Senate worked well into Thursday night to finish reconciling financial reform legislation, including major revisions to subprime lending regulations. Treasury Department Deputy Secretary Neal Wolin said President Obama “will be able to sign into law the strongest set of financial reforms since those that followed the Great Depression.” Conference committee members... Read More

Non-Agency Jumbo Share Remains Deflated

The non-agency share of jumbo mortgage originations – those exceeding $417,000 – has suffered with the continued presence of Fannie Mae, Freddie Mac and the FHA in the jumbo market. Non-agency originations accounted for 40.2 percent of the $37.27 billion in jumbo production in the first quarter of 2010, according to a new Inside Nonconforming Markets analysis... [Includes one graph] Read More

Servicers Defend Relatively Slow HAMP Activity

One of the most persistent complaints about the Home Affordable Modification Program has been the slow pace at which servicers have permanently modified troubled mortgages. At a hearing this week by the House Committee on Oversight and Government Reform, non-prime servicers defended their HAMP efforts. Through May, there were more borrowers whose HAMP trials have been... [Includes one chart] Read More

Mods Helping Subprime Performance Temporarily

Non-prime servicers continue to increase their modification efforts, helping to limit subprime delinquency rates in recent months. However, missed payments are a major concern as the majority of non-prime mods are expected to re-default. The total delinquency rate on subprime mortgage-backed securities issued between 2005 and 2008 peaked at 54 percent... Read More

Option ARM Performance Improves, Mods Decline

Option ARM performance improved in the first quarter of 2010 for the first time since federal regulators started tracking delinquencies on the mortgages. The slight increase in performance occurred even as mods on the mortgages declined. The share of option ARMs that were current and performing increased to 66.3 percent at the end of the first quarter of 2010... [Includes one graph] Read More

Income Verification Driving Repurchase Requests

While repurchase requests put a number of subprime lenders out of business in 2007 and beyond, the current wave of repurchase requests largely relates to income verification on prime mortgages. “The larger issues today are more underwriting deficiencies and stated income issues as opposed to appraisal issues,” Pamela Padgett, vice president of single-family underwriting and quality control... Read More

Non-Prime Negative Equity Stable Since Mid-2008?

Negative equity on securitized non-prime mortgages peaked in mid-2008 and has stayed relatively stable since then, according to a report released last week by the Government Accountability Office. Upon further scrutiny, the promising findings look to be misleading as second mortgages were excluded from the negative equity calculation. The share of outstanding securitized... Read More

Interpretation Alters Option ARM MBS Payments

Payments to certain option ARM mortgage-backed security investors are being disturbed due to conflicting interpretations of deal documents, according to Moody’s Investors Service. The rating service found that three option ARM MBS deals issued in 2006 by Residential Funding Corp. have a “sequential trigger event” definition that is “open to conflicting interpretations... Read More

News Briefs

Chase Home Finance is one of the first servicers to initiate mods via the Second Lien Modification Program component of the Home Affordable Modification Program. Seven servicers have... Morgan Stanley this week agreed to pay $102 million in a settlement with the Massachusetts Attorney General’s Office regarding the investment bank’s role in the securitization... Read More

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