The Federal Housing Finance Agency and its wards, Fannie Mae and Freddie Mac, want to change servicer compensation to provide more resources for addressing nonperforming loans and try to reduce consolidation in the market, but MBS analysts remain concerned that fiddling with the current system could derail the to-be-announced market. “A big concern is that the TBA market for mortgages is very fragile,” said Jim Gross, vice president of financial reporting and public policy at the Mortgage Bankers Association. “Making radical changes could further rock the market.” The more radical proposal outlined by the...

Redwood Trust took a loss on the $375.2 million jumbo mortgage-backed security it issued at the end of September, officials at the real estate investment trust revealed this week. However, the company plans to issue another jumbo MBS within the next few months and anticipates turning a profit on its non-agency activity in the long-term. ...

New regulatory requirements – including a controversial plan to assign ratings on a rotating basis – are encouraging firms to test the traditional approaches to rating MBS and ABS, but some observers say the reliance on an issuer-pay business model will be tough to change. New rating services are coming up with new ways to assess risk with more dynamic, ongoing reviews and more sources of information, and they’re less reliant on being fed information, said Stephen Kudenholdt, co-chair of the capital markets practice at SNR Denton. But the expectation that the market would shift to an investor-paid model clearly hasn’t...

Not much has changed since the 2010 edition of the ABS East Conference, and the outlook for 2012 is hardly encouraging, but conference sponsor Information Management Network drew about 30 percent more participants to its annual industry gathering in Miami Beach this week. As one attendee put it, everybody at the conference was down on the market, yet nobody is buying and nobody is selling. Regulatory uncertainty continues to stymie securitization activity. The federal government still dominates the U.S. mortgage market, with little change in sight. Tepid economic growth is generating lackluster demand for...

Most of the major players in mortgage securitization support some of the new disclosures floated by the Securities and Exchange Commission in its revised shelf eligibility proposed rule – with a number of key changes and clarifications. Reflecting the investor’s perspective, the Asset Management Group of the Securities Industry and Financial Markets Association again “enthusiastically supported” the SEC’s proposal to mandate standardized disclosure at the asset level, believing that all of the asset-level data fields should be mandatory. “Well functioning markets require the disclosure of as much relevant asset-level data as...

Continued stress in the prime non-agency MBS sector, rising delinquencies and the use of a new loan-level loss model have prompted Fitch Ratings to revise loss expectations for more than 40 percent of non-agency pools backed by prime mortgage loans. A recent review of 1,154 rated transactions backed by prime collateral, consisting of approximately 15,000 bonds, caused Fitch to affirm or upgrade an estimated 58 percent of the prime non-agency MBS portfolio and to downgrade the remaining 42 percent, according to a report by the rating agency. At least 60 percent of the downgraded MBS were rated...

“Is a 30-year FRM always the best option for consumers?” asked Sen. Richard Shelby at a hearing held by the Senate Banking, Housing and Urban Affairs Committee this week. The Alabama Republican was raising an issue that lies at the foundation of any new mortgage finance system the government may try to cook up. The 30-year FRM, a staple in the U.S. housing market for generations, has come to rely on the separation of credit risk and interest rate risk that results from a government-backed mortgage securitization system. “Securitization by Fannie and Freddie make them possible,” said John Fenton, president and CEO of Affinity Federal Credit Union. “Without...

The lower loan limits instituted this month for conforming mortgages opened a number of regional opportunities for non-agency lenders. As of Oct. 1, 250 counties have lower government-sponsored enterprise loan limits compared with the conforming loan limits of 2010, according to an analysis by affiliated publication Inside Mortgage Finance. Michael Fratantoni, vice president of single-family research and policy development at the Mortgage Bankers Association, said the portion of the market newly eligible only for non-agency financing is significant in comparison to the amount of non-agency jumbo originations in recent years. ... [includes one data chart]

Smaller issuers of Ginnie Mae mortgage-backed securities will find it easier to pledge mortgage servicing rights (MSRs) to obtain warehouse financing and better compete with their larger rivals, thanks to changes announced recently by Ginnie Mae. Changes to the “Acknowledgment Agreement” will make it simpler for Ginnie Mae to honor servicing pledges and allow the transfer of related servicing rights. They also clarify and limit the conditions under which Ginnie Mae can deny an issuer’s request to transfer servicing to the issuer’s creditor. Under the previous 2007 procedures, an issuer seeking Ginnie Mae’s approval to pledge its rights to servicing income as a security for a loan from a private lender must ...

Long-term investor involvement is the industry’s best bet and “only realistic alternative” to boost housing demand and allow government housing agencies to meaningfully discharge their backlog of real estate owned properties, according to a report by Amherst Securities Group. However, Amherst notes that private investors will require more financing options and better access to bulk portfolios of homes, perhaps through a government program, in order to absorb and convert dormant distressed properties into active, income-producing rentals. “The massive housing market overhang is a clear danger to the U.S. economy – it creates...