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Inside Nonconforming Markets

April 19, 2013

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FHFA Plans to Expand GSE/Non-Agency Risk Sharing Well Beyond Initial Pilot

“Private capital out there, here we come,” Edward DeMarco, acting director of the Federal Housing Finance Agency, said this week. He was talking about pending risk-sharing pilot transactions between the government-sponsored enterprises and the non-agency market. The FHFA set a goal for Fannie Mae and Freddie Mac to each issue at least $30.0 billion in risk-sharing transactions this year. Those efforts were delayed in 2012 due to regulatory concerns, but DeMarco said the GSEs will soon issue such deals ... Read More

Prices Climbing for Jumbo Mortgages

It stands to reason that with non-agency jumbo mortgage-backed security issuance reviving to some degree, prices paid in the secondary market for jumbo whole loans are rising. Traders and jumbo consultants who play in the sector tell Inside Nonconforming Markets that prices for quality product are now above par, at 103. As recently as last fall, prices were in the 101 and 102 range, depending on the lender and the underlying collateral. “The market for whole loans is alive and well for ... Read More

Congress Ready to Start Debate on GSE Reform

The Senate Banking, Housing and Urban Affairs Committee hasn’t marked up a bill in more than a year, but Democrats and Republicans on the panel pushed this week to begin the process of reforming the government-sponsored enterprises. “I think the time is right to address this issue and move it forward,” Sen. Jon Tester, D-MT, said this week at a hearing by the committee. “I think there are folks on both sides of the aisle that want to quit playing with this like a political football and ... Read More

BofA Agrees to Record Non-Agency Settlement

Bank of America agreed this week to pay $500 million to settle lawsuits from investors in non-agency mortgage-backed securities issued by Countrywide Financial in 2005 through 2007. If it receives judicial approval, the settlement on about $15.0 billion in non-agency MBS will be the largest-ever non-agency MBS class-action recovery. “After five years of hard-fought litigation, this record-breaking recovery is a tremendous result for MBS investors misled by Countrywide and ... Read More

Redwood’s Non-Agency MBS Faces SEC Scrutiny

Non-agency jumbo mortgage-backed securities issued by Redwood Trust in 2010 and 2011 have been subject to scrutiny by the Securities and Exchange Commission in recent months. The SEC looked into Regulation AB compliance issues on the deals, largely seeking increased disclosures. The SEC’s inquiries generally related to deal participants other than Redwood. And in some cases, the SEC sought disclosures related to actions beyond the firms’ participation in non-agency MBS issuance ... Read More

Hard-Money Lender May Quadruple Production

California Capital Real Estate Advisers of Pasadena, CA, could quadruple its hard-money production volume this year, according to Mark Mozilo, a principal in the firm. “The rehab business is going crazy here,” Mozilo said. He estimated that 80 percent of CALCAP’s business is in the rehabilitation category. “There’s a lot of fix-it-up and flip it activity,” he said. Although the “quadruple” estimate sounds impressive, the firm’s overall production volume is tiny compared to conventional lenders ... Read More

Regulators Seen Holding Back Non-Agency MBS

“The policy mix is very much weighted on the side of not lending, or at least not underwriting anything but a prime loan,” according to Chris Whalen, an executive vice president and managing director at Carrington Investment Services. Whalen and others spoke last week at a panel hosted by the American Enterprise Institute. The industry analysts said actions by federal regulators are limiting issuance of non-agency mortgage-backed securities. Tom Zimmerman, a managing director at UBS, said ... Read More

Home-Equity Loan Performance Improving

Performance on home-equity loans is improving, with industry participants optimistic about future performance. Bank and thrift holdings of HELs continue to decline, based on a new ranking and analysis from the Inside Mortgage Finance Bank Mortgage Database. Delinquencies on HELs fell to 4.03 percent in the fourth quarter of 2012 from 4.20 percent the previous quarter, according to the American Bankers Association. “We saw the first inkling of improvement for that sector,” said ... [Includes one data chart] Read More

Servicers Under Pressure on $25B Settlement

The five servicers participating in the $25 billion national servicing settlement will face increased scrutiny due to complaints regarding their compliance with the settlement. In addition to requiring a certain amount of loss mitigation actions on non-agency loans, the settlement set standards to be followed by the servicers. Joseph Smith, the settlement’s monitor, said he is establishing additional metrics for the settlement to address complaints about actions by Ally Financial, Bank of America ... Read More

Non-Agency Refi Proposal in Obama’s Budget

The Obama administration’s 2014 budget proposal calls for a Home Affordable Refinance Program for non-agency borrowers, although prospects for getting legislation through Congress remain slim. The proposed budget included a small section entitled “finish the task on universal refinancing for responsible homeowners.” The section noted that the Obama administration worked with the government-sponsored enterprises in 2012 to double the number of HARP refinances for GSE borrowers with negative equity ... Read More

CFPB Proposes Changes to Subprime Escrow Rule

The Consumer Financial Protection Bureau this week proposed changes to a final rule issued in January to remove an inadvertent gap in protections for borrowers receiving higher-priced mortgages and tweak the definitions of “rural” and “underserved” areas. The proposed changes relate to a final rule on escrow requirements for higher-priced mortgage loans. Lenders are currently required to establish escrow accounts for certain HPMLs for a minimum of one year. The CFPB’s final rule generally ... Read More

News Briefs

A former managing director and global head of structured credit in the investment banking division of Credit Suisse Group pled guilty last week to a scheme to hide losses on non-agency mortgage-backed securities. Kareem Serageldin faces a maximum sentence of five years in prison and a maximum fine of the greater of $250,000 or twice the gross gain or loss from the offense. The Department of Justice had charged Serageldin with fraudulently inflating the prices of non-agency MBS and ... [Includes four briefs] Read More

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