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Inside Nonconforming Markets

August 15, 2014

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Significant Number of Issues Need Fixing To Restore Non-Agency MBS Market

Trustee responsibilities, the role of the government-sponsored enterprises, deal documentation, loan-level disclosures, servicing, ratings, assignee liability, regulatory uncertainty, lien priority, bondholder communication and incentives for banks. These are just a few of the issues that need to be addressed for non-agency MBS issuance to resume in a meaningful manner, according to industry participants. About 25 comment letters were submitted after a request from the Treasury ... Read More

SFIG Seeks to Improve MBS Transparency

The Structured Finance Industry Group has proposed investor-friendly standards for non-agency mortgage-backed securities in an effort to increase activity in the sector. The first “green paper” on Project RMBS 3.0 focuses on representations and warranties, triggers for independent reviews and disclosure of underwriting guidelines. “The goal here is to produce a proposal for standards that we would hope the industry adopts,” said Richard Johns, SFIG’s executive director ... Read More

Morgan Stanley to Issue Unique Jumbo MBS

Morgan Stanley was set to issue its first jumbo mortgage-backed security since the financial crisis this week. The $256.48 million deal differs from most jumbo MBS issued in recent years in that all the loans were sourced from one lender, and they’re all adjustable-rate mortgages, including a fair number of interest-only loans. Morgan Stanley Residential Mortgage Loan Trust 2014-1 was scheduled to close Aug. 15. Fitch Ratings and Standard & Poor’s gave the deal ... Read More

Redwood Sees Strong Growth with Jumbo Sellers

Redwood Trust is set to significantly increase the number of lenders that sell jumbo mortgages to the real estate investment trust, according to company officials, largely from a new partnership with the Federal Home Loan Banks. Redwood had 140 active sellers at the end of June. The REIT plans to start testing its high-balance loan program with the FHLBanks’ Mortgage Partnership Finance Program in the fourth quarter of this year. Redwood said about 750 of the more than ... Read More

Nonbanks Ready to Enter Non-QM Market

The list of lenders preparing to offer loans that don’t meet qualified mortgage standards continues to grow. Most recently, a number of nonbanks have expressed interest in the non-QM sector, looking for a different business model than the banks that are holding non-QMs in portfolio. New Penn Financial rolled out its non-QM offerings this week. The wholesale “Home Buyer Power” product allows for debt-to-income ratios up to 55 percent and interest-only options, along with ... Read More

Subprime Performance Improves, Portfolios Shrink

It was business as usual in the subprime servicing market during the second quarter of 2014, save for the lack of large transfers of servicing from banks to nonbank special servicers. Subprime mortgage performance continued to improve and the amount of subprime mortgages outstanding continued to decline. Some $374.0 billion in subprime mortgages were outstanding as of the end of the second quarter of 2014 ... [Includes one data chart] Read More

ATR/QM Standards Have Limited Jumbo Lending

The Consumer Financial Protection Bureau’s ability-to-repay requirements and standards for qualified mortgages have reduced originations of jumbo purchase-mortgages, according to 50.7 percent of the 67 bank jumbo lenders recently surveyed by the Federal Reserve. An Inside Nonconforming Markets analysis of the survey results reveals that the major impediments to originations are income verification requirements and ... [Includes one data chart] Read More

GSEs’ Nonprime Holdings Continue to Run Off

The government-sponsored enterprises’ holdings of nonprime mortgages continue to decline, largely due to runoff, according to a new analysis by Inside Nonconforming Markets. Fannie Mae and Freddie Mac held a combined $252.22 billion in Alt A and subprime mortgage assets as of the end of the second quarter of 2014, down 18.3 percent from the second quarter of 2013. Purchased/guaranteed mortgages account for ... [Includes one data chart] Read More

News Briefs

Moody’s Investors Service this week announced a proposed update to its rating criteria for jumbo mortgage-backed securities. Under the proposed criteria, collateral modeling will be based on a new version of Moody’s Individual Loan Analysis tool as opposed to the portfolio analysis tool Moody’s has used since 2008. Navneet Agarwal, a managing director at Moody’s, said the proposed changes set “a new standard for transparency” ... [Includes six briefs] Read More

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