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Inside Nonconforming Markets

December 13, 2013

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GSE Fees Rise and FHA Loan Limits Fall, But Impact Limited for Non-Agency MBS

Higher guaranty fees at the government-sponsored enterprises and lower loan limits for FHA mortgages in 2014 aren’t expected to prompt an increase in the issuance of non-agency mortgage-backed securities because the economics for securitization remain unattractive. Industry analysts are also concerned that the Senate’s confirmation of Rep. Mel Watt, D-NC, as director of the Federal Housing Finance Agency could slow efforts to shift business from Fannie Mae and Freddie Mac to the non-agency market. The FHFA announced ... Read More

Most Non-Agency MBS Expected to Be QMs

The rating services are slowly rolling out their criteria for non-agency mortgage-backed securities issued after the Consumer Financial Protection Bureau’s qualified-mortgage requirements take effect. The consensus among the rating services appears to be that jumbo issuers will initially stick to QMs that receive safe-harbor protections. To meet QM requirements, lenders must document eight underwriting characteristics, including income, employment and debt-to-income ratio. QMs also cannot include ... Read More

Ocwen Plans Nonprime Mortgage Originations

After years of servicing loans for distressed subprime borrowers but avoiding mortgage originations, Ocwen Financial is planning to offer nonprime mortgages. “Nonprime lending is sort of like crabgrass,” William Erbey, Ocwen’s executive chairman, said last week at an investor conference hosted by the firm. “I’ve been around long enough to see it get hit by Roundup and come back through the cracks.” Ocwen jumped into the agency origination market last year with its acquisition of Homeward Residential ... Read More

GSEs Still Dabble in New Nonprime Mortgages

While Fannie Mae and Freddie Mac stress their avoidance of new subprime and Alt A mortgages, nonprime mortgages continue to account for a small portion of the government-sponsored enterprises’ new business. According to an analysis by Inside Nonconforming Markets, Fannie’s portfolio of guaranteed subprime mortgages is declining much more rapidly than Freddie’s. Fannie guaranteed $4.30 billion in subprime mortgages as of the end of the third quarter of 2013, down 17.3 percent ... [Includes one data chart] Read More

Fraud a Concern for Jumbos and QM Eligibility

Fraud among jumbo borrowers is increasing, particularly regarding employment and income, according to industry analysts who say lenders should pay particular attention to fraud on loan characteristics that factor into qualified mortgage requirements and new ability-to-repay standards. “In high-cost markets, people tend to be willing to fudge a little bit on their income,” said Ann Fulmer, a vice president of industry affairs at Interthinx, during a webinar hosted this week by the provider of fraud-mitigation services ... Read More

Old HELOCs Pose Multiple Risks for Banks

The end-of-draw period for home-equity lines-of-credit originated 10 years ago isn’t the only concern for banks, according to federal regulators. Fair-lending violations are also a risk in cases where lenders reduced credit limits on HELOCs or suspended the loans due to declines in home prices. Many lenders suspended borrowers’ HELOCs in recent years or reduced credit limits due to significant declines in home prices, according to the Federal Reserve. “The manner in which HELOC accounts ... [Includes one data chart] Read More

Regulators Prep Non-Agency Rules, Punt on Others

Federal regulators this week issued a final rule regarding appraisals for higher-priced mortgages as required by the Dodd-Frank Act. The rule is the latest in a long line of DFA-related requirements that will have an impact on the non-agency market. The final rule issued this week exempts three classes of higher-priced mortgages from appraisal requirements: certain streamlined refinances, some transactions secured by manufactured homes and transactions of $25,000 or less. Higher-priced mortgages ... Read More

Firms Meeting Most Servicing Requirements

Servicers are complying with most of the requirements under the $25 billion national servicing settlement and the Home Affordable Modification Program. Regulators have warned that penalties will be severe if problems persist. The monitor of the national servicing settlement said in a report last week that CitiMortgage failed one of more than 24 metrics tested in the second quarter of 2013. Joseph Smith, the settlement monitor, said the failure regarding whether loans were delinquent ... Read More

News Briefs

Nationstar Mortgage issued a $158 million non-agency mortgage-backed security this week with prime Alt A mortgages that have seasoned for an average of 11 years, according to a rating report from Standard & Poor’s. The AAA tranche had credit enhancement of 8.60 percent. Mortgages in the MBS had low or no documentation and 43.7 percent were cash-out refinances. S&P said 82.8 percent of the mortgages haven’t been delinquent in the last 24 months and the current ... [Includes one brief] Read More

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