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Inside Nonconforming Markets

January 11, 2013

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CFPB ‘Qualified Mortgage’ Rule May Crimp Subprime, Non-Agency Lending

The final rule issued by the Consumer Financial Protection Bureau this week to define ability-to-repay requirements and “qualified mortgages” puts non-agency and subprime mortgages at a significant disadvantage to prime and agency mortgages. The slant against non-agency loans goes beyond what was required by the Dodd-Frank Act, according to industry analysts. The rule is set to take effect Jan. 10, 2014. Under the final rule, qualified mortgages must meet... Read More

Servicing Consolidation Expected to Continue

Sales of delinquent mortgages to nonbank servicers are expected to continue throughout 2013, according to industry analysts. The sale of $306 billion in mortgage servicing rights announced this week by Bank of America could be the largest transfer this year, but there appears to be plenty of remaining volume for established special servicers and expected new nonbank servicers. “We believe that other banks with large MSR assets may also begin to complete sales or pursue other strategies to limit their size on bank balance sheets,” Fitch Ratings said. Analysts suggest... Read More

Nationstar to Buy Non-Agency Servicing from BofA

Nationstar Mortgage announced this week that it agreed to purchase $113 billion in non-agency mortgage servicing rights, as measured by unpaid principal balance, from Bank of America. The sale will more than double Nationstar’s non-agency servicing portfolio. Some $102 billion in agency mortgages are included in the sale, which priced at $1.3 billion. Walter Investment Management concurrently announced the purchase of $93 billion of unpaid principal balance in Fannie Mae-backed servicing assets from BofA. Ocwen Financial also reportedly bid... Read More

Redwood Turns to ARMs, EverBank, on New MBS

Redwood Trust is set to issue its first non-agency jumbo mortgage-backed security of the year, a portion of which will include ARMs and significant contributions from EverBank. The real estate investment trust said it is close to being able to issue one non-agency MBS a month this year, up from six in all of 2012. Sequoia Mortgage Trust 2013-1 largely includes characteristics common to other recent Redwood deals, including 7.30 percent credit enhancement for the two tranches set to receive AAA ratings from Fitch Ratings, Kroll Bond Rating Agency and Moody’s Investors Service. However, ARMs have not been included in a Redwood deal since a January 2012 issuance. ARMs will account... Read More

HEL Holdings Down, Equity Beginning to Increase

Bank and thrift holdings of home-equity loans declined by 2.5 percent in the third quarter of 2012 compared with the previous quarter, according to the Inside Mortgage Finance Bank Mortgage Database. A significant portion of the holdings remain in a negative equity position, though overall homeowner equity increased in the past year. Banks and thrifts reported $1.11 trillion in total HEL business at the end of the third quarter of 2012, including home-equity lines of credit and closed-end second mortgages held in portfolio, and unused HELOC commitments. The $103.36 billion in CES holdings in the third quarter of 2012 was down 5.8 percent from the previous quarter. Cristian de Ritis, a senior director of consumer credit economics at Moody’s Analytics, said...[Includes one data chart] Read More

New Push for Non-Agency HARP 3.0 Refinances

The Obama administration is making a renewed push in 2013 for a government-backed non-agency refinance program, potentially the third major phase of the Home Affordable Refinance Program. However, there appear to be numerous hurdles to using the government-sponsored enterprises to help refi non-agency borrowers and a similar proposal using the FHA has yet to gain widespread support in Congress. Under the latest HARP 3.0 proposal, Fannie Mae and Freddie Mac would refinance certain non-agency mortgages with negative equity, waive mortgage insurance requirements and charge the borrowers higher guaranty fees. The proposal would require approval from Congress. “After taking significant taxpayer bailouts, the GSEs’ fiscal condition is... Read More

CFPB Sets New Requirements for High-Cost Loans

The Consumer Financial Protection Bureau this week issued a final rule setting new restrictions and requirements for high-cost mortgages. The rule implements requirements set by the Dodd-Frank Act and will take effect in January 2014. For first-lien mortgages, high-cost loans have annual percentage rates 6.5 percentage points or more above the average prime offer rate. The APR threshold for second liens is 8.5 percent above the APOR. The DFA expanded the definition of high-cost mortgages to include purchase mortgages and home-equity lines of credit in addition to refinances. The CFPB noted... Read More

Non-Agency Loans in Foreclosure Settlement

An $8.5 billion settlement this week between federal regulators and 10 servicers included a large portion of non-agency mortgages. Servicers with significant non-agency holdings were also left out of the settlement, though federal regulators said they are still working toward a deal with those companies. The settlement applies to foreclosures initiated in 2009 and 2010. Non-agency mortgages had much higher foreclosure rates than other mortgage types during that time. Aurora, Bank of America, Citibank, JPMorgan Chase, MetLife Bank, PNC, Sovereign, SunTrust, U.S. Bank and Wells Fargo agreed... Read More

News Briefs

Servicers handling portfolio loans and non-agency mortgages continue to increase their use of principal reduction loan modifications, according to the Office of the Comptroller of the Currency. Some 23,335 principal reduction mods were completed in the third quarter, up from 11,178 in the third quarter of 2011 and from 14,944 in the second quarter of 2012. The mods accounted...[Includes four briefs] Read More

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