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Inside Nonconforming Markets

July 9, 2010

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Non-Agency and Non-Prime Sectors to Be Defined by ‘Qualified’ Mortgage Regulations

Financial reform legislation that is on track to become law late this month will revamp non-agency mortgage securitization and underwriting standards for non-prime mortgages. The two sectors are addressed by separate “qualified” mortgage provisions which will likely limit non-agency securitization and non-prime originations.“Securitization of those lucky... Read More

Wells Fargo Ends Non-Prime Portfolio Originations

Wells Fargo – one of the last remaining large-scale non-prime originators – announced this week that it will discontinue non-prime portfolio originations. The change is tied to the closure of all 638 Wells Fargo Financial branches, including the elimination of 2,800 positions within the next 60 days and 1,000 positions during the next 12 months. “The economics of a separate Wells Fargo... Read More

Closed-End Second Portfolios, Originations Dwindle

The amount of closed-end second mortgages held by banks and thrifts fell by 19.2 percent in the first quarter of 2010 compared with the same period in 2009, according to the Inside Mortgage Finance Bank Mortgage Database. CES originations continue to decline as performance of the mortgages worsens. Closed-end seconds were a popular tool for... [Includes one chart] Read More

American Home Details Proprietary Mod Process

The two major differences between Home Affordable Modification Program mods and proprietary mods for American Home Mortgage Servicing are income documentation standards and the net-present value model. The major non-prime servicer detailed its tactics at a recent hearing by the House Committee on Oversight and Government Reform. David Friedman, president and CEO of American Home... Read More

Re-Default Rates Lowest on Portfolio Mods

Modifications on mortgages held in servicers’ retained portfolios continue to perform better than mods on mortgages serviced for others. Principal forgiveness appears to be the most significant factor in portfolio mod performance, according to new data from the Office of the Comptroller of the Currency and the Office of Thrift Supervision. Of the 343,153 portfolio mortgages... [Includes one graph] Read More

FDIC’s Proposal Seen as Non-Agency MBS Killer

Mandatory risk-retention provisions proposed by the Federal Deposit Insurance Corp. could prevent any recovery of the non-agency mortgage-backed security market, according to many mortgage industry participants. “MBA believes the proposed rule is an inappropriately blunt instrument that may permanently snuff out what little is left of the secondary market for private-label MBS,” the Mortgage... Read More

High-Cost Mortgage Rules to Be Strengthened

Financial reform legislation pending in Congress will make significant changes to the regulation of high-cost mortgages. In addition to widening the threshold for what qualifies as a high-cost mortgage, the Dodd-Frank Act will tighten underwriting standards for high-cost mortgages under the Home Ownership and Equity Protection Act. The legislation makes a number of changes to the... Read More

Non-Agency Investors Prefer Short Sales to REO

The average time it takes for a loss to be realized on a mortgage after a borrower becomes 60-days delinquent is five months shorter for short sales than for real-estate owned dispositions, according to analysts at Deutsche Bank Securities. Short sales allow borrowers to avoid a lengthy foreclosure process and usually result in lower loss severity for non-agency mortgage-backed security investors... Read More

News Briefs

Illinois Attorney General Lisa Madigan sued Bank of America’s Countrywide Financial last week, alleging that the lender steered minorities... The Gulf Coast oil spill will likely worsen problems for Florida borrowers with non-agency mortgages, according to a new analysis by... Read More

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