Ally Financial may be getting closer to ridding itself of its non-agency mortgage unit, ResCap, the residual of a business formerly known as Residential Capital that helped invent the jumbo securitization and Alt A markets. According to reports, Ally is weighing putting ResCap into bankruptcy as a prelude to selling the business to Fortress Investment Group or another suitor. Ally’s primary mortgage business, GMAC Mortgage, is a top seller-servicer in the agency market. ResCap and GMAC Mortgage are separate entities that are both subsidiaries of the holding company that also owns Ally...

Many non-agency MBS investors are upset with the $25 billion servicing settlement involving 49 state attorneys general, eight federal agencies and the nation’s five largest servicers, the full terms of which were filed in U.S. District Court this week. Bank of America, Wells Fargo, JPMorgan Chase, Citigroup and Ally Financial will receive some credit for modifying loans they service but do not own, although several of these firms have indicated that they plan to focus their efforts on portfolio loans. The Association of Mortgage Investors said the settlement establishes a precedent under which the bad debts of...

The non-agency MBS market showed some spark as always-performing loans continued to improve in February and more nonperforming loans moved to the re-performing bucket, according to Amherst Securities Group’s latest analysis of the mortgage market. In its February report, Amherst said first-time defaults from the always-performing bucket dropped to 0.75 percent during the month from 0.82 percent in January. In dollar terms, new defaults constituted $4.0 billion, down from $4.4 billion the previous month, the firm reported. On a year-over-year basis, always-performing loans were down to $525.6 billion from...

The documents governing a proposed $25.0 billion settlement involving five major banks include greater incentives for principal reduction loan modifications on portfolio loans rather than loans in non-agency mortgage-backed securities. However, non-agency MBS investors remain concerned that they could take losses due to the settlement. The consent judgments against Ally Financial, Bank of America, Citigroup, JPMorgan Chase and Wells Fargo were filed in federal court this week, a month after the settlement was announced by 49 state attorneys general and the federal government ...

Ginnie Mae will question certain mortgage-backed securities issuers about reporting inconsistencies in pool data submissions over the last couple of months and try to resolve those issues to avoid delay in MBS pool processing. In an audio conference with issuers last week, Ginnie Mae officials said agency staff discovered the flawed data submissions while poring over several months’ worth of pool data submitted by issuers. While most of the information fell within theVargas said the discrepancies were attributed to a small group of issuers, who will be contacted soon to work on corrections before Ginnie Mae puts stronger edits up front. She said the agency wants to ...

A Fannie Mae proposal to reduce the cost of lender-placed homeowner insurance might be great news for borrowers but not for insurance companies that underwrite the product, warned Moody’s Investors Service. While Fannie has not disclosed the full details of its cost-reduction proposal, the government-sponsored enterprise plans to place policies directly with insurance companies, rather than accept policies put in place by the mortgage lender. Last week, the GSE issued a “request for proposals” inviting insurance companies to compete for the GSE’s lender-placed business. The request is...

Principal reductions hold the potential for a positive impact on the mortgage market by preventing some foreclosures, but residential MBS investors stand to lose from an improperly implemented, wide-ranging loan modification effort, according to Fitch Ratings. The mandated principal reduction provisions in the recent $25 billion settlement involving state attorneys general, the federal government and the five largest mortgage servicers appear to be a “sensible approach” as loan modifications with principal reductions have performed better than other types of mods, but Fitch noted the benefit comes with a...

Ginnie Mae and Credit Suisse struck a “pledge acknowledgement agreement” last week that industry observers think will increase liquidity for mortgage lending and servicing, especially for smaller, independent players, attract more Ginnie lenders and issuers to the marketplace, and lower the overall costs of funding FHA/VA originations. Late last week, Ginnie announced that Credit Suisse has become the first institution to adopt a recently-revised pledge acknowledgement agreement. Through this arrangement, mortgage securities issuers will now be able to more easily tap funds at lower...

Commercial banks increased their stake in the residential MBS market to a record $1.360 trillion as of the end of 2011, with a lot of the growth coming in Ginnie Mae MBS. Bank MBS holdings rose 2.4 percent from the third to the fourth quarter as seven of the 10 largest bank MBS investors reported significant increases. Compared to the end of 2010, bank MBS holdings were up 10.3 percent over a period in which the outstanding supply of single-family MBS continued to decline. Commercial banks held a record 20.9 percent of outstanding residential MBS at the end of last year, based...(Includes two data charts)

MBS investors continue to sweat over the impact of the $25 billion multistate servicing settlement, especially regarding potential conflicts of interest when banks own a second mortgage while servicing a securitized first lien. “The minimum requirement is that every time you modify a first lien, you have to modify the second lien to the same degree, or you have to write off the second lien entirely,” explained Shaun Donovan, secretary of Housing and Urban Development, at a housing conference earlier this week. Donovan characterized the treatment of home-equity loans in the settlement as a positive...