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Inside Nonconforming Markets

March 30, 2012

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Redwood Sees Benefits of Non-Agency MBS, Issues $328 Million Jumbo Deal

After suggesting that it would consider selling jumbos to investors via whole loan sales, Redwood Trust this week issued a $327.94 million non-agency jumbo mortgage-backed security. While the real estate investment trust has not ruled out whole loan sales, the issuance reflects confidence in the non-agency market – from Redwood and investors. Redwood’s latest security, Sequoia Mortgage Trust 2012-2, is similar to other recent non-agency MBS issuance by the REIT. Redwood has now issued five non-agency MBS deals since April 2010, the only non-agency MBS issuance backed by new originations since 2008. At the end of February, Redwood officials revealed that the REIT was considering bulk sales ... Read More

SEC Seeking Non-Agency Due Diligence from Wells

The Securities and Exchange Commission and Wells Fargo are in a dispute regarding due diligence reports relating to almost $60.0 billion in non-agency mortgage-backed securities issued by Wells between September 2006 and early 2008. The SEC last week filed a subpoena enforcement action against Wells for failure to produce documents. The bank disputes the SEC’s account. The SEC said it has been seeking the documents since September. The regulator claimed that Wells agreed to produce the documents but has failed to do so. The SEC said its action relates to its investigation into whether Wells made material misrepresentations or omitted material facts on certain non-agency MBS issued by the bank ... Read More

AG Miller Has Little Sympathy for MBS Concerns

Iowa Attorney General Tom Miller downplayed concerns raised by investors in non-agency mortgage-backed securities regarding the pending $25.0 billion servicing settlement. “The current set of concerns aren’t particularly warranted,” he said this week during a webinar hosted by Inside Mortgage Finance Publications. The Association of Mortgage Investors has asked for a number of changes to the settlement, including a cap on the amount of principal reduction that can be completed on non-agency MBS to meet the participating servicers’ loss mitigation requirements. Miller said the AMI is the only group he is aware of that might challenge approval of the settlement by the U.S. District Court for the District of Columbia. “I think that their concerns are not going to be realized ... Read More

Non-Agency Repurchases Largely Unresolved

A mere 4.7 percent of repurchase demands on loans in non-agency mortgage-backed securities have been resolved, according to a new analysis by Inside Nonconforming Markets. The $352.7 million in completed repurchases account for a small portion of the up to $64.18 billion in recoveries analysts estimate non-agency MBS investors could see from representation and warranty issues. According to new filings with the Securities and Exchange Commission, $7.45 billion in repurchase demands on non-agency MBS had been made as of the end of 2011. The first-time reports were filed by securitizers that are still in business and did not include heavyweights such as Bear Stearns, Countrywide Financial, IndyMac, Lehman Brothers and Washington Mutual ... [Includes one data chart] Read More

Prudential Completes Unique Subprime MBS Sale

Prudential Financial this week issued a $1.0 billion bond to sell vintage subprime mortgage-backed securities. Analysts described the bond as a hybrid between an MBS and a covered bond. Standard & Poor’s gave Prudential Covered Trust 2012-1 an A rating, which was based on the rating of Prudential, not of the subprime MBS being sold. The bond was sold as a private placement and Prudential has not commented on the sale. However, in its recently released annual report for 2011, Prudential said it had transferred some of its subprime MBS holdings ... Read More

Moody’s Warns PennyMac of ‘Headline Risk’

PennyMac Loan Services has some unique loss-mitigation strategies, but Moody’s Investors Service warned this week that some of the company’s approaches are risky. Among other issues, PLS can require borrowers that otherwise would not qualify for a loan modification to deed their property to the servicer if the mod does not succeed. “While this approach can improve loss mitigation performance or reduce timelines, Moody’s believes these programs could result in borrowers and regulators challenging this practice as well as headline risk to the company,” the rating service said. PLS has yet to employ the tactic. The warning from Moody’s ... Read More

Ocwen Makes Changes to Match Competitors

Ocwen Financial has made a number of adjustments in recent months to better compete with other nonbank servicers. Perhaps most significantly, the special servicer has started to shift to an “equity light” business model. The shift occurred at the end of February when Home Loan Servicing Solutions completed a $186.2 million initial public offering. HLSS said it will use the proceeds to purchase the rights to receive servicing and other related fees, associated servicing advances and other related assets from Ocwen. HLSS was founded by William Erbey, chairman of Ocwen ... Read More

First-Lien Holdings Up, Performance Improves

Bank and thrift portfolio holdings of first liens increased in the fourth quarter of 2011 compared with the previous quarter, according to the Inside Mortgage Finance Bank Mortgage Database. Loan modifications completed by the major bank and thrift servicers during that period also decreased significantly, as portfolio performance has improved. Banks and thrifts held $1.76 trillion in first liens at the end of 2011, up 1.9 percent from the third quarter of 2011. The increase in holdings suggests strong portfolio originations as some banks are allowing their mortgage portfolios to run-off and others are selling delinquent mortgages. At the same time, loan modifications offered by the major banks and thrifts declined by ... [Includes one data chart] Read More

News Briefs

Fannie Mae, Freddie Mac and the FHA accounted for 41.8 percent of the $84.66 billion in lending over the $417,000 threshold in 2011, the lowest share they’ve had since emergency loan limits went into effect in 2008, according to an analysis by affiliated publication Inside Mortgage Finance. The agency share of jumbo production peaked in the second half of 2009 at 53.1 percent.The government-sponsored enterprises and Ginnie Mae financed 36.6 percent of the loans exceeding $417,000 that were originated in the fourth quarter of 2011. That was down from a 42.7 percent agency share of the jumbo market in the third quarter of 2011 ... [Includes three briefs] Read More

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