Due diligence can be a more significant factor in the rating of a jumbo mortgage-backed security than the representations and warranties on the deal, according to Kroll Bond Rating Agency. However, major investors in non-agency MBS have expressed concerns about due diligence on new deals along with the adequacy of disclosures. At a structured-finance investor conference hosted by KBRA this month, the rating service noted that it doesn’t adjust expected losses or credit enhancement for variations in ...

Mortgages originated by brokers and correspondents, once a concern for MBS investors, have actually performed better in recent years than retail-originated loans, according to Moody’s Investors Service. The rating service said risks from third-party originations will remain low if lenders continue to put an emphasis on retail-originated mortgages. Default rates on securitized mortgages have decreased significantly in recent years regardless of origination channel. However, Moody’s noted that beginning in 2010, production from third-party originators started performing better than retail mortgages. From 2003 through 2009, third-party originations defaulted...

Commercial banks and savings institutions reached a record level of investment in non-mortgage ABS during the third quarter of 2013, according to a new Inside MBS & ABS analysis and ranking. Banks and thrifts held a combined $173.12 billion of non-mortgage ABS as of the end of September, up 4.4 percent from the previous quarter. The industry’s aggregate ABS portfolio was up 6.9 percent from the third quarter of last year. Banks and thrifts pushed...[Includes one data chart]

Ginnie Mae is taking a “go slow” approach to merging its Ginnie I and Ginnie II MBS programs, noting in a new “stakeholder letter” that players in the market have “voiced concerns about the logistics of how we get there, and in particular, what will become of the legacy Ginnie Mae I security.” Ginnie officials declined to provide an update on the process this week. A spokeswoman issued a statement saying the agency “is still studying the issue,” adding that, “We are currently evaluating what market participants want.” Since 2010, Ginnie Mae II issuance has been increasingly outpacing...

Commercial banks continued to see their investment in residential MBS slowly evaporate during the third quarter of 2013 even though the overall market appears to finally be growing again. A new Inside MBS & ABS analysis of recently-released call report data shows that commercial banks and thrifts held a combined $1.513 trillion of residential MBS as of the end of September. That was down 1.0 percent from the end of June and represented the lowest level since the middle of 2011. Depositories and other private MBS investors have...[Includes two data charts]

Nancy Handal, managing director of insurance conglomerate MetLife, oversees a $70 billion fixed-income portfolio and a $6 billion “high-yield” residential MBS opportunity fund – but has bought into just one jumbo MBS deal over the past few years. And she’s not shy about the reasons why: it’s all about disclosures. Handal is not happy about what non-agency issuers disclose and in particular she’s dismayed that MBS investors are essentially frozen out of the due-diligence process. Speaking at a housing forum sponsored by the Urban Institute and CoreLogic this week, the MetLife executive expressed...

In just a matter of days, JPMorgan Chase agreed to two separate settlements totaling $17.5 billion to resolve federal and state civil claims as well as representation and warranty and servicing claims involving residential MBS. On Nov. 19, the Department of Justice, along with other federal and state agencies, announced a $13 billion settlement with JPMorgan, which acknowledged making misrepresentations about billions of dollars in MBS sold to investors prior to Jan. 1, 2009. The settlement is said to be the largest combination of damages and civil fines for a single entity in U.S. history. Most of the damage was inflicted...

A senior Obama administration official this week flatly rejected the notion of private investors purchasing the mortgage-backed securities business of Fannie Mae and Freddie Mac. White House Economic Advisor Gene Sperling noted while speaking at a Washington, DC, conference that the White House won’t get behind a $52 billion proposal by Fairholme Capital Management to purchase and spin off the GSEs’ insurance business.

JPMorgan Chase twice in as many weeks announced multi-billion dollar deals to settle legal disputes with numerous parties – including Fannie Mae, Freddie Mac and their regulator, the Federal Housing Finance Agency – involving residential mortgage-backed securities. This week, the Department of Justice, along with other federal and state agencies – including the Federal Housing Finance Agency – reached a $13 billion settlement with JPMorgan, which acknowledged making misrepresentations about billions of dollars in MBS sold…

Current homeowners have increasingly purchased homes with cash in lieu of a mortgage in recent months, according to the latest Campbell/Inside Mortgage Finance HousingPulse Tracking Survey. Analysts suggest that the trend is driven by frustrations with the mortgage process and seasonal factors. Some 28.6 percent of home purchases completed in October relied solely on cash for financing, based on the three-month moving average. That was the second consecutive monthly increase in the cash-financing share, after it fell to 26.8 percent in August. While investors predominantly use cash to purchase homes, homeowners tend...