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Inside Nonconforming Markets

July 26, 2013

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Small, Unidentified Lenders Account For Growing Share of Jumbo MBS

Small lenders have accounted for a growing share of contributions to non-agency jumbo mortgage-backed securities. Some deals have included more than 70 lenders, with most of the lenders contributing less than 5 percent of the volume of mortgages included in a security. While the lenders’ individual contributions to a particular jumbo MBS are small, they add up to significant market share, particularly when issuers don’t identify the lenders in prospectus documents filed with the Securities ... [Includes two data charts] Read More

Chase, Redwood Prepare Non-Agency Jumbo MBS

Rising interest rates haven’t stopped JPMorgan Chase and Redwood Trust from working on new non-agency jumbo mortgage-backed securities with loans originated in the lower-rate environment. Chase’s security will include mortgages with an average age of four months, while the mortgages in Redwood’s jumbo MBS are about two months old. The weighted average gross coupon on mortgages in Chase’s $345.05 million non-agency jumbo MBS is 3.79 percent, well below the average 4.68 percent interest rate quoted ... Read More

Freddie Issues Non-Agency Risk-Sharing Deal

Freddie Mac sold $500 million in non-guaranteed credit risk this week as part of an effort to eventually reduce the government-sponsored enterprises’ market share and help price their guaranty fees. While non-agency investor appetite for the transaction was strong, industry analysts suggest that the deal has limited usefulness for the long-term goals set by the Federal Housing Finance Agency. The Structured Agency Credit Risk Debt Notes Series 2013-DN1 included four tranches, all unrated. The two mezzanine ... Read More

GSEs’ G-Fees Well Below Non-Agency Execution

The guaranty fees charged by the government-sponsored enterprises are currently well below levels that would make issuing non-agency mortgage-backed securities attractive for originators of conforming mortgages, according to industry analysts. The g-fees charged by Fannie Mae and Freddie Mac have nearly doubled since 2011 and hit an average of 50 basis points in the first quarter of 2013, according to the Federal Housing Finance Agency. The FHFA has directed the GSEs to increase their g-fees as part of ... Read More

First Republic Seeing Success with Jumbos

First Republic Bank is one of the few bank originators of non-agency jumbo mortgages that has sold a significant share of its production in the secondary market in the past year. Officials at the bank said the sales have been driven by borrowers’ preference for 30-year fixed-rate mortgages and investor demand in the non-agency market, both of which have changed recently. In the first quarter of 2013, First Republic originated $2.32 billion of mortgages, including $1.85 billion in non-agency jumbo mortgages ... Read More

Bipartisan Support Needed for GSE Reform

The House Financial Services Committee this week approved legislation that would dissolve the government-sponsored enterprises and leave the private market to pick up the slack, with all the panel’s Democrats and two Republicans voting against it. Obama administration officials suggest that bipartisan support will be necessary to enact GSE reform and significantly increase non-agency involvement in housing finance. The Protecting American Taxpayers and Homeowners Act of 2013, H.R. 2767, was sponsored by ... Read More

New Penn Touts Mortgages for Foreign Nationals

New Penn Financial is one of the few lenders putting an emphasis on mortgages for borrowers that are foreign nationals. The company offers mortgages to non-U.S. citizens with rates and terms somewhat looser than those offered by other lenders operating in the niche market. “Our proprietary program offers flexibility and fewer restrictions,” New Penn said. While data on mortgages to foreign national borrowers are scarce, the loans largely appear to be a non-agency product, both held in portfolio and sometimes securitized ... Read More

Performance on Redwood’s MBS Remains Strong

The non-agency jumbo mortgage-backed securities issued by Redwood Trust between March 2010 and November 2012 haven’t taken any losses, according to Kroll Bond Rating Agency. Delinquencies on the securities remain extremely low, and a significant portion of mortgages included in the MBS have prepaid. As of July, three of the nine non-agency jumbo MBS issued by Redwood from 2010 through 2012 had loans that were delinquent. However, the loans were only in the 30-day delinquency bucket ... Read More

News Briefs

The Federal Housing Finance Agency announced a settlement this week with UBS Americas regarding non-agency mortgage-backed securities purchased by Fannie Mae and Freddie Mac between 2004 and 2007. It is the third settlement out of 18 similar lawsuits filed by the FHFA in 2011 and the first to include a disclosed dollar amount. The FHFA said UBS will pay a combined ... [Includes two briefs] Read More

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