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Inside Nonconforming Markets

August 31, 2012

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Treasury Takes Next Steps to ‘Wind Down’ GSEs, But Full Reform Still Years Away

The Treasury Department’s recent announcement on the next steps to “wind down” the government-sponsored enterprises will have little immediate impact on the non-agency market, according to industry analysts. The Treasury will require Fannie Mae and Freddie Mac to contribute all future profits to the government, reduce their investment portfolios at a quicker pace and submit annual plans to reduce mortgage credit risk. “[The changes] will help expedite the wind down of Fannie ... [Includes one chart] Read More

Trustees Acting on Non-Agency Repurchase Claims

A lawsuit filed last week by Bank of New York Mellon against WMC Mortgage and GE Mortgage Holdings is the latest sign that repurchase issues on non-agency mortgage-backed securities are increasing. After years of resistance, trustees are starting to act on behalf of non-agency MBS investors seeking repurchases. Three of the four major banks reported increases in non-agency repurchase requests in the second quarter of 2012 compared with the previous quarter, according to an analysis by Inside Nonconforming Markets ... Read More

Early Actions by Settlement Servicers Vary

The five servicers participating in the $25.0 billion national servicing settlement have taken vastly different approaches to loss mitigation, according to a report released this week by the Office of Mortgage Settlement Oversight. Short sales dominated early activity and Bank of America, the servicer with the largest obligations under the settlement, accounted for a small amount of initial loan modifications completed by the servicers. Combined, the five servicers granted non-agency borrowers ... [Includes one chart] Read More

SEC Looking at Due Diligence on ResCap MBS

The Securities and Exchange Commission is conducting an in-depth investigation of non-agency mortgage-backed securities issued by Ally Financial’s Residential Capital, according to court documents released this week. The documents revealed that due diligence provider R.R. Donnelley & Sons Company has delayed the investigation, which started in February. “The commission is investigating ResCap’s origination and underwriting practices used to make and approve loans in connection with offerings of ... Read More

GSE Short Sales Could Cause 2nd Lien Losses

The streamlined short sale programs announced last week by Fannie Mae and Freddie Mac could increase losses on bank holdings of second liens, according to industry analysts. The changes, directed by the Federal Housing Finance Agency, include the ability for the government-sponsored enterprises to offer up to $6,000 to second-lien holders to expedite a short sale. “Previously, second-lien holders could slow down the short sale process by negotiating for higher amounts,” the FHFA said. Overall ... Read More

REO Rental MBS Expected, Ratings Uncertain

The rating services report increasing inquiries regarding potential ratings for securitization of income from real-estate owned rental properties. The first REO rental non-agency mortgage-backed security could be issued later this year, but Suzanne Mistretta, a senior director at Fitch Ratings, suggested that AAA ratings are unlikely initially. “The lack of historical data and ambitious growth strategies by regional operators will make high investment-grade ratings on these transactions difficult ... Read More

Ocwen Executive Chairman Moves for Lower Taxes

Ocwen Financial announced last week that its executive chairman has relocated to the U.S. Virgin Islands as part of the company’s efforts to reduce its tax rate. William Erbey, the executive chairman of Ocwen, said the company worked for nearly three years on the tax maneuver, which will reduce Ocwen’s effective tax rate by more than half. The strategy included the establishment of a new corporation, Ocwen Mortgage Servicing, in February. The wholly owned subsidiary of Ocwen was formed under the laws of ... Read More

CFPB to Expand on Fed’s Anti-Steering Rule

The Consumer Financial Protection Bureau’s recent proposed rule regarding loan originator compensation would expand and clarify anti-steering rules established by the Federal Reserve, in effect since April 2011. “Compensation structures frequently gave loan originators incentives to steer consumers into loans with higher rates or other unfavorable terms,” according to the CFPB. The regulator’s proposed rule cited a consent order issued by the Fed in 2011 regarding subprime steering by Wells Fargo ... Read More

News Briefs

M&T Bank announced this week that it will acquire Hudson City Bancorp for $3.7 billion. The jumbo lender will merge into a subsidiary of M&T. Hudson City was the 10th-ranked non-agency jumbo lender in 2011, according to Inside Nonconforming Markets, with an estimated $3.15 billion in such originations. Officials at M&T said they acquired Hudson – which was having difficulties funding its jumbo originations – to expand M&T’s retail branch network. Officials at Hudson City said M&T will help expand ... [Includes five briefs] Read More

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