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Inside Nonconforming Markets

January 3, 2014

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Jumbo MBS Issuance Started 2013 With a Bang, Ended in a Whimper

Just three jumbo mortgage-backed securities were issued in the fourth quarter of 2013, according to a new ranking and analysis by Inside Nonconforming Markets. During the second quarter of the year, one deal was issued every week, on average. Investor demand for jumbo MBS plummeted after interest rates started to increase in May. A number of the deals that were completed in the second half of the year received minimal attention from investors, with at least one planned issuance scrapped ... [Includes one data chart] Read More

Watt Delays Planned GSE Fee Increases

Mel Watt, the incoming director of the Federal Housing Finance Agency, appears to be taking a less aggressive stance toward decreasing the government-sponsored enterprises’ dominance of the mortgage market than Ed DeMarco, the acting director of the FHFA. The FHFA in December announced changes to GSE mortgage-backed security guaranty fees that would amount to an average increase of approximately 11 basis points, to be implemented in March and April ... Read More

GSE Loan Limits Unchanged Until at Least October

The Federal Housing Finance Agency said in December that it would wait until at least October before setting new “purchase limits” for Fannie Mae and Freddie Mac. The regulator of the two government-sponsored enterprises is considering establishing purchase limits below the statutory conforming loan limits. In the highest-cost markets, the biggest loan the GSEs could buy would be $600,000, instead of $625,500. The national purchase limit would be $400,000, roughly 4 percent below the $417,000 conforming ... Read More

Portfolio Lending Lost Steam in Third Quarter

Originations held in bank portfolios couldn't outpace portfolio runoff, according to a new ranking and analysis by Inside Nonconforming Markets. The dollar volume of first liens in bank and thrift portfolios declined by 0.6 percent in the third quarter of 2013 compared with the previous quarter. Total residential mortgages outstanding increased by a scant 0.1 percent during that time, the first quarterly increase in total mortgages outstanding since early 2008. While banks ... [Includes one data chart] Read More

Outlook Strong for Non-Agency Originations

Non-agency mortgage originations are expected to remain relatively strong in 2014, led by bank jumbo production and an expected resumption of issuance of non-agency mortgage-backed securities. Through three quarters in 2013, an estimated 22.4 percent of the $1.59 trillion in mortgages originated (including second liens) had non-agency execution, according to affiliated publication Inside MBS & ABS, with most of the non-agency activity concentrated in bank portfolios. Total mortgage originations ... Read More

Jumbo MBS Execution Dominated by Fed’s QE

The Federal Reserve’s asset purchases will continue to dominate execution of jumbo mortgage-backed security issuance until the significant purchases of agency MBS are stopped, according to analysts at Bank of America Merrill Lynch. The tapering of the Fed’s quantitative easing beginning this month will do little to end the advantages agency MBS have over new jumbo MBS. “We believe that the Fed’s ‘non-economic’ bid for agency MBS contributes to the distorted price advantage for agency MBS ... Read More

QM Requirements Present Jumbo Opportunities

The qualified mortgage requirements set to be implemented next week present jumbo lenders with opportunities as well as compliance challenges, according to industry participants. “We are particularly bullish about the jumbo mortgage business because we believe that multiple regulatory and competitive factors provide strong tailwinds to our business,” Greg Garrabrants, president and CEO of BofI Holdings, said during a recent investor presentation. He said the debt-to-income ratio requirements ... Read More

State AGs Settle with Ocwen, Plan More Actions

State attorneys general and the Consumer Financial Protection Bureau reached a long-pending settlement with Ocwen Financial in December. Regulators suggest that additional actions are planned, and they have focused on the largest servicers as well as servicers involved with large transfers. As part of the settlement, Ocwen must complete $2.0 billion in principal reduction for borrowers with negative equity and refund $125.0 million to the nearly 185,000 borrowers who went through improper foreclosures from ... Read More

News Briefs

Fitch Ratings recently released new loan-loss model criteria for jumbo mortgage-backed securities. The rating service said the new loss criteria could result in higher credit enhancement requirements for new jumbo MBS. The new criteria assign a penalty to loans sourced through non-retail channels. The rating service will now include a borrower’s liquid reserves as a variable in its loss modeling. Fitch will apply a 25 percent haircut to the reported reserve amount based on the volatility ... [Includes five briefs] Read More

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