Underwriting standards on the four prime non-agency mortgage-backed securities issued in the first quarter of 2016 loosened marginally compared with the typical prime jumbo MBS issued in recent years, according to a new analysis by Inside Nonconforming Markets. The combined loan-to-value ratio on prime non-agency MBS issued in the first quarter of 2016 averaged 69.8 percent. That was somewhat higher than the average combined ... [Includes one data chart]

Litigation over legacy residential MBS deals that went sour in the run-up to the financial crisis continued last week, as California Attorney General Kamala Harris sued investment bank Morgan Stanley for alleged misrepresentations about RMBS investments, which she said contributed to huge losses by investors such as the state’s public pension funds. In what is just the second such use of the False Claims Act by a state, Harris’ complaint, filed in San Francisco Superior Court, alleges that Morgan Stanley violated the FCA, as well as California securities law and other state laws, by allegedly hiding or downplaying the risks of complex investments involving large numbers of underlying loans or other assets. Harris used...

Ginnie Mae issued $93.41 billion of single-family mortgage-backed securities during the first three months of 2016, an 8.6 percent drop from the previous quarter, according to a new Inside FHA/VA Lending analysis of loan-level MBS data, excluding FHA reverse-mortgage activity. Early 2016 was the slowest market in a year for Ginnie MBS production, though it still was stronger than most of the agency’s pre-2015 business. And issuance in the first quarter of 2016 was 17.0 percent ahead of the volume produced during the same period last year. The soft spot in the first quarter was FHA lending, especially purchase-mortgage activity. Issuers delivered $54.44 billion of FHA loans into Ginnie MBS during the period, a 12.1 percent drop from the fourth quarter, including a 15.0 percent decline in FHA purchase mortgages. Securitization of VA loans fell by a ... [4 charts].

Fannie Mae and Freddie Mac saw a slight decline in their single-family mortgage business during the first three months of 2016 – in fact, it was the slowest quarter in nearly two years – according to a new analysis and ranking by Inside Mortgage Finance. The two government-sponsored enterprises issued $172.97 billion of single-family mortgage-backed securities during the first quarter of this year, a 3.4 percent decline from the fourth quarter of 2015. It was the slowest three-month volume since the second quarter of 2014, and the fourth-lowest output since the GSEs were put in conservatorship back in 2008. The slowdown stemmed...[Includes three data tables]

Ginnie Mae securitization of jumbo mortgage loans with a VA guaranty rose significantly in 2015 despite a volume drop-off in the fourth quarter, according to Inside FHA/VA Lending’s analysis of agency data. Year-over-year results saw an almost 60 percent increase in Ginnie Mae mortgage securitization backed by VA jumbo loans. This was slightly dampened by 17.1 percent drop in VA MBS production in the fourth quarter from the previous quarter. All top-five VA jumbo securitizers – Wells Fargo, Freedom Mortgage Corp., PennyMac Corp., U.S. Bank, and Quicken Loans – reported significant drops quarter-over-quarter and year-over-year. Wells Fargo delivered a total of $5.0 billion in VA jumbo loans into Ginnie pools, making it the leading jumbo securitizer in that segment. This accounted for 17.7 percent of the market. Freedom Mortgage ended the year with $2.1 billion in ... [ Charts ]

Issuers of publicly-registered ABS are adjusting to so-called Regulation AB2 requirements established by the Securities and Exchange Commission, but observers say the pro-investor rules have increased issuer costs and slowed issuance. One of the biggest challenges for issuers from Reg AB2 has been the requirement for an asset-representations reviewer. The rule requires publicly-registered MBS and ABS to include an asset-representation reviewer whose work can be triggered by a certain level of delinquent assets in a pool or by an investor vote. Susan Thomas, the associate general counsel of Ford Motor Credit Company, said...

A lack of demand from investors continues to stymie efforts to revive issuance of non-agency MBS. While issuers have made concessions to potential investors, wide gaps remain in various areas. Some of the frustrations were discussed last week at the ABS Vegas conference produced by Information Management Network and the Structured Finance Industry Group. Diane Wold, a managing director at Two Harbors Investment, said that while non-agency MBS investors have repeatedly called for increased disclosure, issuers’ disclosure efforts sometimes go unnoticed. The Securities and Exchange Commission requires issuers to disclose results from third-party due diligence reviews at least five days before a non-agency MBS prices. The disclosures offer extensive loan-level details and are required for both publicly-registered deals and private ...

There’s got to be a better way for investors in non-agency MBS to communicate with each other than taking out ads in the Wall Street Journal, according to various attendees at the ABS Vegas conference produced by Information Management Network and the Structured Finance Industry Group. Owen Cyrulnik, a partner at the law firm of Grais & Ellsworth who has represented investors in buyback disputes, said non-agency MBS investors that have wanted to force buybacks have been “paralyzed” by the voting requirements in most non-agency MBS. The deals typically require a certain share of investors in an MBS – at least 25 percent of investors in many cases – to approve of actions. “It was literally impossible to find other certificate holders,” ...

Fannie Mae and Freddie Mac are wading into the testing phase for the Single Security initiative for to-be-announced MBS, and they agreed on common names for the new product. The first-level securities – the equivalent of Fannie’s MBS and Freddie’s participation certificates – will be called “Uniform MBS.” The second-level deals – replacing Fannie’s Megas and Freddie’s Giants – will be known as “Supers.” Fannie has already registered the trademarks for these names. It appears that domain names for both, at least the .com variety, have been grabbed up. Both government-sponsored enterprises continue to prepare for conversion, and Common Securitization Solutions continues to release software for system-to-system testing, according to the Federal Housing Finance Agency’s 2015 Scorecard Progress Report released late last week. These ...

Real estate investment trusts that focus on residential MBS continued to pare their investments in the fourth quarter, a trend that may last through the remainder of the year. Interest rate volatility and continued reports of “illiquidity” in the MBS market remain key factors plaguing the sector. Still, prices for agency product remain strong and, as Inside MBS & ABS noted recently, commercial banks and thrifts continue to add to their holdings, which reached a record $1.643 trillion at yearend 2015. The 16 public mortgage REITs tracked by this publication held $233.17 billion of MBS at year-end, 92.4 percent of which included Fannie Mae, Freddie Mac and Ginnie Mae product. The non-agency market continues to shrink as legacy nonprime securities ...