Jefferies Funding is underwriting a securitization of a revolving warehouse facility for agency mortgages originated by two nonbanks. The $225.0 million Station Place Securitization Trust 2016-1 received provisional Aaa ratings this week from Moody’s Investors Service. The rating service said the transaction is based on a “back-to-back” repo structure, with the three classes of notes scheduled to be paid off one year after issuance. The proceeds from the sale of the notes will be used by the issuer to purchase eligible mortgages and participation certificates from the repo seller. The revolving warehouse facility will be sponsored...

The expected increase in interest rates on some previously modified home mortgages is a slight credit negative for RMBS performance because these loans will re-default at a higher rate, according to analysts at Moody’s Investors Service. However, higher default rates will have only a modest effect on subprime and Alt A RMBS, because only a small percentage of outstanding subprime and Alt A mortgage loans are positioned to experience future rate step-ups. In their research, the analysts found that subprime and Alt A modified loans become delinquent more frequently after a rate step-up. “Modified subprime and Alt A loans with a demonstrated performance history of four to five years become delinquent at a significantly higher rate after a step-up in interest rates than do loans of a similar type and vintage that have not stepped up,” said the analysts in a new report released this week. According to their data, in July 2015, only 2 percent of the modified re-performing subprime loans became...

If lenders used the seemingly sensible underwriting standards that were in place in 2001, some 1.2 million more mortgages would have been originated in 2014, according to estimates by the Urban Institute’s Housing Finance Policy Center. Laurie Goodman, director of the HFPC, said lenders have “plenty of room to safely ease credit.” An underwriting index from the HFPC suggests that originators are accepting little risk in terms of borrower or loan characteristics, hindering a recovery in the mortgage market and the broader economy. Lenders note...

The credit quality of U.S. conduit/fusion commercial MBS kept degrading during the fourth quarter of 2015, while conduit loan leverage is rising and is expected to continue to do so, according to a new report from Moody’s Investors Service. Conduit loan leverage as measured by the Moody’s Loan to Value (MLTV) ratio ticked upward from 118.2 percent in the third quarter last year to 118.9 percent in the fourth quarter. This is the third time in which that metric has topped the pre-crisis peak level of 117.5 percent, the ratings service said. Further, the conduit loan MLTV rose...

Issuers of MBS and ABS continue to address compliance issues with the Securities and Exchange Commission’s so-called Regulation AB2. Meanwhile, the Structured Finance Industry Group has urged the SEC to continue to delay further action on disclosure proposals that remain outstanding. In August 2014, the SEC published a final rule setting a variety of disclosure requirements for the structured finance market. Issuers of publicly registered MBS and ABS were required to comply with rules, forms and disclosures established by Reg AB2 by Nov. 23, 2015. Asset-level disclosure requirements will take effect Nov. 23 of this year. During a webinar hosted by the law firm of Mayer Brown late last week, Stuart Litwin, a partner at the law firm, said...

When the Federal Reserve hiked short-term rates back in mid-December, mortgage rates were expected to increase as well and keep heading north in the new year. But thanks to deep concerns about economic growth in China – not to mention plunging oil prices – all bets are now off. This past week, the price on the benchmark Fannie Mae 3.5 percent security increased by 44 basis points, according to figures compiled by MBS Quoteline. As Inside MBS & ABS went to press ...

Issuers of Ginnie Mae mortgage-backed securities pushed a record $435.80 billion of government-insured loans through the program during 2015, according to a new Inside FHA/VA Lending analysis and ranking. Last year’s total Ginnie MBS issuance topped the previous record of $429.50 billion issued during 2009. The $435.80 billion total for 2015 includes securitization of FHA home-equity conversion mortgages and other single-family loans guaranteed by FHA, the VA, and the Department of Agriculture rural housing program from Ginnie pool-level MBS data that are not truncated. Production in 2015 hit its high-water mark in the third quarter with $128.23 billion in issuance, and then fell 18.0 percent in the final three months of the year. Purchase mortgages continued to account for most Ginnie business in 2015, 58.0 percent of the agency’s forward-mortgage securitizations. But a huge factor in the ... [ Charts ]

The first rated securitization backed by nonperforming Home Equity Conversion Mortgage loans contains strong, credit-positive features that outweigh the credit risk associated with nonperforming loans, according to a Moody’s Investors Service analysis. The effect of some of these positive features on the performance of Nationstar HECM Loan Trust 2015-2, however, depends on whether Nationstar Mortgage remains as servicer for the transaction, said the rating agency. Nationstar has a servicer rating of B2/Stable from Moody’s and is also the transaction’s sponsor. Nationstar issued NHLT 2015-2 in November 2015 and by the end of December, the first remittance report showed strong initial performance. Credit enhancement to the Aaa (sf)-rated notes increased by 1.69 percent in the first month of operations, Moody’s noted. “As long as Nationstar continues to be the ...

Four nonprime MBS backed by newly-originated residential loans came to market during the last four months of 2015, but none of deals were rated, a situation that could change in the new year. In a recent interview with Inside MBS & ABS, John Hsu, head of capital markets for Angel Oak Capital, said his company hopes to get a rated deal done in 2016, believing such a milestone would help move the nascent market forward. “We need...

The prospects for consumer ABS in 2016 are a bit mixed. Auto ABS – especially subprime – appear susceptible to the Federal Reserve’s promised raising of interest rates this year and beyond, but credit card ABS are strong and performing well. “Rising interest rates could pressure U.S. auto ABS transactions, especially first on subprime deals,” analysts at Fitch Ratings said in a recent client note. While they expect last month’s initial rate increase by the Fed to have only a marginal near-term impact on borrowers, they said the plan to raise rates gradually over four years could increase the monthly debt burden on auto loan borrowers. “Although the rate increases are expected to affect the entire market, Fitch believes...