Non-Agency MBS

Browse articles from all of our Newsletters related to Non-Agency MBS.

July 21, 2017 - Inside FHA/VA Lending

Around the Industry

Bipartisan Flood Bill Introduced in Senate. The Senate Committee on Banking, Housing and Urban Affairs will soon consider a bipartisan bill introduced this week that would keep the National Flood Insurance Program funded for six more years and create new risk mitigation procedures for communities to follow. Senate Banking Committee Chairman Mike Crapo, R-ID, and ranking Democrat Sherrod Brown, OH, said the bill would serve as a template for consideration by the whole committee. The Senate bill does not include core provisions in the House version, including the development of a private flood insurance market to complement the NFIP. In addition, the bill does not call for cuts in the reimbursement rate for Write-Your-Own flood-insurance carriers that service NFIP policies. However, amendments are likely, according to Crapo and Brown. Meanwhile, the ...

July 21, 2017 - Inside Nonconforming Markets

News Briefs

The $210.45 million mortgage-backed security Angel Oak Capital Advisors issued earlier this month had the tightest execution of any MBS backed by non-qualified mortgages, according to Sreeni Prabhu, Angel Oak’s co-CEO and CIO. “We believe investors like Angel Oak’s vertically integrated issuer model,” Prabhu said. “This is unique in the marketplace and offers them a ‘pure play’ exposure to Angel Oak’s origination and underwriting capabilities.” ... [Includes six briefs]

July 21, 2017 - Inside Nonconforming Markets

Non-Agency Participants Call for More TRID Fixes

The Consumer Financial Protection Bureau needs to do more to address problems with the TILA-RESPA Integrated Disclosure rule, according to participants in the non-agency market. The final rule issued this month by the CFPB was seen as helpful but insufficient. The final rule from the CFPB clarified some issues and formalized some guidance. The Structured Finance Industry Group said uncertainty regarding TRID violations persists. “SFIG applauds the efforts of the CFPB to ...

July 21, 2017 - Inside Nonconforming Markets

Invictus Shows Variety with New Nonprime MBS

A new nonprime mortgage-backed security from Invictus Capital Partners varies in some ways from the deal the firm issued in February. Invictus is set to issue the $241.00 million Verus Securitization Trust 2017-2. The deal the firm issued in the first quarter – the first MBS from Invictus – was for $145.02 million. The purchase-mortgage share in the new deal is down sharply compared with the previous MBS from Invictus, at 46.0 percent compared with 68.3 percent. The cash-out refinance ...

July 21, 2017 - Inside Nonconforming Markets

Redwood Taps First Republic, Quicken for Jumbos

Loans from more than 100 lenders are in the latest jumbo mortgage-backed security from Redwood Trust but most of the lenders contributed such a small volume of loans to the issuance that they weren’t identified by rating services. Only two lenders have consistently provided more than 5.0 percent of the dollar volume in jumbo MBS Redwood has issued this year: First Republic Bank and Quicken Loans. Loans from First Republic account for 19.6 percent of the $485.25 million ...

July 21, 2017 - Inside Nonconforming Markets

Fixed-Rate Loans Dominate Non-Agency MBS

Only fixed-rate mortgages were included in prime non-agency mortgage-backed securities issued in the second quarter of 2017, according to an analysis by Inside Nonconforming Markets. It was the third quarterly interval since the first quarter of 2016 that adjustable-rate mortgages and loans with interest-only features were excluded from prime/jumbo MBS. And in the first quarter of 2017, ARMs accounted for less than 1.0 percent of total prime non-agency ... [Includes two data charts]

July 21, 2017 - Inside Nonconforming Markets

PIMCO Calls for Non-Agency Reforms

Policymakers should make a number of changes to regulations to entice investors to buy new non-agency mortgage-backed securities, according to officials at Pacific Investment Management Company. PIMCO was a major investor in pre-crisis non-agency MBS. “Unlike the complexities of government-sponsored enterprise reform, a few minor, straightforward changes – some of which can be done through regulation, not legislation – can be made to bring private capital back to the market ...

July 21, 2017 - Inside Nonconforming Markets

Flagstar to Issue Jumbo MBS, Joining Chase As the Only Active Bank Issuer in the Market

The jumbo mortgage-backed security market is set for a significant boost as Flagstar Bank will issue MBS. Since 2015, only one bank has issued jumbo MBS: JPMorgan Chase. Other issuers have all been nonbanks as banks have largely opted to retain jumbos in portfolio instead of issue non-agency MBS. Some details about the planned Flagstar Mortgage Trust 2017-1 were revealed this week in documents filed with the Securities and Exchange Commission ...

July 21, 2017 - Inside MBS & ABS

PIMCO Says Tackle Changes to Non-Agency Market, Then Do GSE Reform; Firm Critical of Plans Thus Far

Pacific Investment Management Company published an opinion piece this week calling for changes in the non-agency market before policymakers enact reforms that affect the government-sponsored enterprises. PIMCO was also critical of other GSE reform proposals. “Without a functioning private mortgage market, it will be nearly impossible for the GSEs to shrink their footprint without significant disruption to the housing market and to the underlying homeownership rate,” PIMCO said. PIMCO was...

July 14, 2017 - Inside MBS & ABS

Royal Bank of Scotland Settles with FHFA for $5.5B in 2011 Lawsuit Over Non-agency MBS

Federal Housing Finance Agency lawsuits over pre-crisis non-agency MBS are winding down with one of the last holdouts, Royal Bank of Scotland, reaching a settlement this week for $5.5 billion. In 2011, the agency filed charges against 18 issuers and underwriters alleging securities law violations and fraud regarding non-agency MBS sold to Fannie Mae and Freddie Mac. JP Morgan Chase settled for $4.0 billion, Deutsche Bank for $1.9 billion and Goldman Sachs for $1.2 billion. Most of the cases were settled in 2013 and 2014. The two government-sponsored enterprises purchased...

July 14, 2017 - Inside MBS & ABS

Non-Agency MBS Trustees Expected to Follow Wells in Withholding Funds for Deals Subject to Clean-up Calls

Wells Fargo’s recent maneuver to hold back funds on vintage non-agency MBS subject to clean-up calls could have broader implications for the market, according to industry analysts. Other trustees appear likely to follow the lead set by Wells, which could limit clean-up calls by servicers. In June, Wells withheld $94.3 million in funds from investors in 20 non-agency MBS that were subject to clean-up calls by New Residential Investment. The deals in question are the subject of a lawsuit involving MBS investors alleging that Wells failed to perform its duties as trustee. Wells disputed the charges and withheld the funds to cover potential litigation costs. Analysts at Bank of America Merrill Lynch said...

July 14, 2017 - Inside MBS & ABS

Despite Slump in Prime-Jumbo Space, Non-agency MBS Production Gained Momentum in Second Quarter

The non-agency MBS market is off to what looks like one of its best years in terms of new issuance since the financial crisis, according to a new analysis by Inside MBS & ABS. A total of $15.30 billion of non-agency MBS were issued in the second quarter, representing a gain of 13.4 percent from the first three months of 2017. That brought year-to-date production to $28.80 billion, a 32.0 percent increase over the first half of 2016. As has been the case since 2009, most of the new production has been...[Includes three data tables]

July 7, 2017 - Inside Nonconforming Markets

Flagstar Receives Lender/Servicer Ratings

Flagstar Bank recently received assessments by Fitch Ratings of the bank’s origination platform and servicing operations. The ratings could signal increased involvement in the jumbo mortgage-backed security market by Flagstar. Fitch assigned an “average” rating to Flagstar’s origination platform. “Notable strengths of Flagstar’s origination platform include its experienced senior management team and staff, robust loan sourcing strategy, and comprehensive underwriting ...

July 7, 2017 - Inside Nonconforming Markets

Angel Oak Issues Its Largest Nonprime MBS

A unit of Angel Oak Companies issued its largest nonprime mortgage-backed security this week. The deal comes shortly after a significant amount of mortgages from Angel Oak were included in a separate nonprime MBS from Deephaven Mortgage. The $210.45 million Angel Oak Mortgage Trust I LLC 2017-2 received AAA ratings from DBRS and S&P Global Ratings. Angel Oak has issued three other nonprime MBS, the largest of which was a $150.35 million transaction in 2015 ...

July 7, 2017 - Inside Nonconforming Markets

Prime Non-Agency MBS Issuance Down in 2Q

Issuance of prime non-agency mortgage-backed securities cooled off somewhat in the second quarter of 2017 after a relatively strong showing in the previous period. Three deals totaling $1.88 billion were issued in the second quarter, a 27.6 percent drop from the first three months of the year, according to Inside Nonconforming Markets. However, activity in the first half of this year outpaced the first half of 2016, as the dollar volume of issuance was ... [Includes one data chart]

July 7, 2017 - Inside Nonconforming Markets

Nonprime MBS Has Breakout Quarter, Issuance Up Sharply. More Deals Likely

Issuance of nonprime mortgage-backed securities skyrocketed in the second quarter, and analysts anticipate that the market is set for more growth. A total of $1.08 billion of MBS backed by newly originated nonprime mortgages was issued in the second quarter of 2017, according to Inside Nonconforming Markets. It was the strongest post-crisis quarter for the sector, which has been percolating since the second half of 2015. Issuance in the April-June cycle ... [Includes one data chart]

July 7, 2017 - Inside MBS & ABS

After a Significant Lull, Credit Suisse Returns to Non-Agency MBS Market with a Flurry of Deals

Near the end of the second quarter, Credit Suisse resumed its activity in the non-agency MBS market after a lengthy pause. In May, the investment bank unveiled a $91.18 million deal backed by seasoned FHA loans. That was followed by a $393.97 million issuance backed by seasoned mortgages at the end of June. Credit Suisse marked its return to the jumbo MBS market in June – not as an issuer but as a depositor – lending its shelf registration to American International Group for a $511.98 million MBS. The bank faced...

July 7, 2017 - Inside MBS & ABS

Overall MBS/ABS Production Faltered Slightly In 2Q17, But Issuance Was Up in Some Sectors

The MBS and ABS market was a mixed bag in terms of new issuance during the second quarter, as overall production was down slightly from the beginning of the year, according to a new analysis by Inside MBS & ABS. A total of $430.98 billion of single-family MBS, non-mortgage ABS and commercial-property securitizations was issued in the second quarter, down 2.6 percent from the first three months of the year. That pushed year-to-date issuance to $873.47 billion, up 8.1 percent from the first six months of 2016. Single-family MBS accounted for a hefty 75.1 percent of total issuance so far in 2017, with non-mortgage ABS (13.2 percent) and commercial MBS (11.7 percent) making up the rest. But single-family turned...[Includes three data tables]

June 30, 2017 - Inside MBS & ABS

Fitch Edged Out DBRS in Rating Non-Agency MBS in 1Q17; S&P Was Tops in Non-Mortgage ABS Market

Less than $1 million separated Fitch Ratings and DBRS in the ranking of top rating agencies serving the non-agency MBS market in the first quarter of 2017, a new Inside MBS & ABS analysis reveals. Fitch was on top, although both companies had equal shares (36.5 percent) of the market. Kroll Bond Rating (21.7 percent) and Moody’s Investors Services (17.5 percent) ranked third and fourth. S&P Global was the least active rater of non-agency MBS with just an 11.5 percent share. A significant share of non-agency MBS are issued...[Includes two data tables]

June 30, 2017 - Inside MBS & ABS

Fitch Updates Residential MBS Criteria on Bondholder Communication, Standards for Reps and Warrants

Communication among investors in non-agency MBS looks to be increasingly important. Fitch Ratings has included an assessment of a deal’s bondholder communication platform in revised criteria for residential MBS while the Structured Finance Industry Group continues to work on recommendations for bondholder communication. “Fitch views the inclusion of a bondholder communication platform as a best practice for rep-and-warrant frameworks, particularly in transactions that rely on bondholder votes to influence rep-and-warrant review decisions,” the rating service said. Fitch said...

June 23, 2017 - Inside Nonconforming Markets

News Briefs

Representations and warranties on new nonprime mortgage-backed securities often include weaknesses that limit their ability to protect investors against fraudulent or defective loans, according to an analysis by Moody’s Investors Service. However, the rating service said current practices and dynamics in the nonprime MBS market help to mitigate the risks from weak reps and warranties. Moody’s hasn’t placed ratings on nonprime MBS backed by ... [Includes four briefs]

June 23, 2017 - Inside Nonconforming Markets

Fee Structure Key to Adoption of Deal Agent

One of the most significant variables industry participants are working to address in terms of introducing a deal agent into non-agency mortgage-backed securities is the fee structure. Issuers are trying to balance paying for the services provided by a deal agent without diverting too much cash flow from investors in non-agency MBS. The fee structure will also play a key role in how rating services treat MBS that have a deal agent, with issuers looking for favorable treatment ...

June 23, 2017 - Inside Nonconforming Markets

Trump Admin Seeks to Boost Non-Agency Lending

The Treasury Department last week released a report that called for regulatory reforms aimed to help boost non-agency originations and market share. Many of the reforms relating to the non-agency market could be completed without action from Congress. However, most of them are overseen by the Consumer Financial Protection Bureau, and Treasury’s recommendations appear unlikely to be enacted as long as Richard Cordray is director of the CFPB. Treasury sought input ...

June 23, 2017 - Inside MBS & ABS

Deal Agent Negotiations for Non-Agency MBS Drag on, Moody’s Offers Some Insight

The development of a deal agent for new non-agency MBS has spanned years, with industry participants working toward the best way to compensate the new transaction party, among other issues. A deal agent would have a fiduciary duty to investors, oversee enforcement of representations and warranties, and monitor various participants in a security. The new role is significant because some major investors say that after suffering major losses on MBS issued before the financial crisis, a deal agent is required for them to buy new securities. Clayton Holdings was...

June 23, 2017 - Inside MBS & ABS

Liquidity in MBS and ABS Markets Seen as ‘Adequate,’ Although Lagging Activity in the Corporate Bond Market

Issuance volumes in various MBS and ABS sectors are generally below pre-crisis levels and liquidity in the markets is adequate, according to an analysis by the Financial Industry Regulatory Authority. But the structured finance sector hasn’t flourished as the corporate bond market has in recent years, according to FINRA. The non-governmental regulator of broker-dealers based its analysis in part on data collected by its Trade Reporting and Compliance Engine, which tracks trades in a variety of asset classes. The analysis was completed by FINRA’s Office of the Chief Economist. “Market liquidity [for MBS and ABS] seems...[Includes one data table]

June 16, 2017 - Inside MBS & ABS

Treasury Seeks Significant Regulatory Changes to Spur Non-Agency MBS Market, Boost ABS Issuance

The Trump administration wants to pare back regulations that inhibit the non-agency MBS and ABS market and tilt current securitization economics that favor the government-sponsored enterprises over private issuers. “In order to revitalize a responsible [private-label securities] market, it is important to improve incentives for issuers through reasonable reductions in costs and regulatory burdens,” the Treasury Department said in a new report released this week. In particular, it aimed at adjusting relative economics for the government-sponsored enterprises and FHA/VA mortgage programs. On the regulatory side, Treasury recommends...

June 16, 2017 - Inside MBS & ABS

Ginnie Moves Past Freddie in Outstanding 1-4 Family MBS in Early 2017, Many Investor Classes Up Holdings

Ginnie Mae hit a milestone in the MBS market during the first quarter of 2017, edging past Freddie Mac to become the second-largest supplier of single-family MBS in the world. A new Inside MBS & ABS analysis reveals $1.705 trillion of Ginnie 1-4 family MBS outstanding at the end of March, a 2.2 percent increase in just three months. Meanwhile, outstanding single-family Freddie MBS rose 0.7 percent to $1.703 trillion. Both Ginnie and Freddie accounted...[Includes two data tables]

June 15, 2017 - Inside Mortgage Finance

Servicing Market Continued to Grow in Early 2017, Banks Continued to Back Away From It

The agency servicing market grew steadily in the first quarter of 2017, as the business continued to slide toward nonbanks, a new Inside Mortgage Finance analysis reveals. The Federal Reserve late last week reported that total residential mortgage debt outstanding rose 0.7 percent during the first quarter, hitting $10.330 trillion. It marked the eighth consecutive quarterly increase since the sector hit its post-crash low in March 2015 at $9.912 trillion. Most of the growth came from the agency market, although portfolio holdings – including nonbanks – were...[Includes two data tables]

June 9, 2017 - Inside Nonconforming Markets

AIG Close to Issuing Jumbo MBS

American International Group’s jumbo conduit has purchased a significant volume of mortgages in the past year and has plans to issue non-agency mortgage-backed securities. As of April, AIG Investments had purchased prime jumbo mortgages with an original balance of approximately $4.80 billion, according to Fitch Ratings. AIG launched its residential mortgage lending division in 2013 and has ramped up acquisition activity since then. Fitch recently assessed...

June 9, 2017 - Inside MBS & ABS

Non-Agency MBS Market Gets Busy With New Deals From Redwood, Deephaven, Mill City, MFA and New Residential

June is shaping up to be a strong month for the non-agency MBS market with a handful of new deals that reflect the character of the sector: a reliance on scratch-and-dent transactions mixed with an emerging nonprime component and opportunistic prime jumbo issuance. Five non-agency MBS totaling $1.90 billion hit the market in the first week of June, with three S&D deals accounting for $1.30 billion of the total. The biggest of these was...


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