MBS issuers and investors endorse many aspects of the revised qualified residential mortgage requirements recently proposed by federal regulators, but there are concerns about requirements for other asset classes included in the new risk-retention proposal. Issuers of non-agency MBS, ABS and commercial MBS backed by collateral that doesn’t meet certain qualifying requirements will have to retain risk on at least 5 percent of the deal, as required by the Dodd-Frank Act. Major industry groups have asked the regulators for more time to weigh the new proposed rule, which set a public comment period that ends Oct. 30. Richard Johns, executive director of the Structured Finance Industry Group, offered...

Communication among investors in non-agency MBS as well as between issuers and investors has been inadequate, according to industry participants. Trustees and others are working to address the issues, both with new jumbo MBS and vintage non-agency MBS. Investors cite problems with data availability, consistency, timing and quality. Paul Burke, head of North American agency and trust sales at Citibank, said the communication system currently used for non-agency MBS leaves something to be desired. Communication regarding potential votes for action on non-agency MBS, due to a perceived breach of representations and warranties, for example, is generally funneled...

Officials at Fannie Mae said they learned from Freddie Mac when structuring their pending risk-sharing transaction, including getting the deal rated. Investors are generally impressed with the transactions and look forward to more. Fannie’s Connecticut Avenue Securities Series 2013-C01 is scheduled to close on Oct. 24, according to a presale report released late last week by Fitch Ratings. The higher of the two tranches offered for sale is set to receive a BBB- rating, the lowest investment grade rating available. Speaking at the ABS East conference produced by Information Management Network this week in Miami, Laurel Davis, a vice president at Fannie Mae, said...

Investors at the ABS East conference in Miami this week had a positive outlook for most structured finance investment options, such as vintage non-agency MBS, auto and credit card ABS, collateralized loan obligations and esoteric assets. They were less bullish about new jumbo MBS. More than 3,500 people registered for the conference this year including more than 1,000 investors. Jade Friedensohn, a senior vice president at Information Management Network, the event sponsor, said it was the biggest turnout for ABS East since before the financial crisis. “In the short term things are...

It’s not every day that a stock comes public at $20 a share, falls 7 percent on its first day of trading and then continues to drift downward. Then again, if that stock is a mortgage investing real estate investment trust like Cherry Hill Mortgage Investment Corp., it’s no big surprise. Thanks to rising interest rates – which actually have been in decline during the government shutdown and uncertainty over the U.S. debt ceiling – mortgage REITs have been battered in the market. Cherry Hill, a spin-off of Freedom Mortgage of Mt. Laurel, NJ, went...

The interaction between the qualified mortgage standard promulgated earlier this year by the Consumer Financial Protection Bureau and the qualified residential mortgage standard still being developed by other federal regulators is going to have a myriad of unpleasant side effects for the securitization sector, according to a top industry attorney. “Linking of qualified residential mortgages (QRM) in the risk-retention rules to the definition of qualified mortgage (QM) in the CFPB’s ability-to-repay rules will further deepen the divide between QM and non-QM loans in terms of pricing and availability,” said Stephen Kudenholdt, chairman of the capital markets practice at the Dentons LLC law firm in New York City. Speaking during a webinar this week sponsored by Inside Mortgage Finance, an affiliated publication, the attorney indicated...

Reforms seen in the new era of non-agency jumbo MBS issuance aren’t enough to prompt significant investor participation, according to John Gidman, president of the Association of Institutional Investors. At a hearing this week by the Senate Committee on Banking, Housing and Urban Affairs, Gidman and others called for a number of changes to the non-agency market. “The fundamental structural and process weaknesses for non-agency residential MBS securitization have not been fixed in the current private-label securities market,” Gidman said. “The issuance process itself is very opaque. Ratings continue to be shopped, issuers are still incentivized to water down representations and warranties, and continued variability in structures and documentation make the market more challenging for investors and raise the costs of funding.” He acknowledged...

With some federal agencies effectively downsized by the government shutdown, Ginnie Mae continues to guarantee MBS, but it’s unclear how long it can go on with limited staff and commitment authority. Under the shutdown contingency plan drafted by the Department of Housing and Urban Development, Ginnie has limited its operations to key functions fulfill its obligations to issuers and investors. The agency said MBS guaranties would be honored during the shutdown. While the rest of the workforce is on furlough, some 44 essential salaried employees will continue...

Non-agency MBS investors are still unhappy with how negotiations for the $25 billion national servicing settlement were handled and are concerned that the federal government will pull a similar move in settlement negotiations with JPMorgan Chase. John Gidman, president of the Association of Institutional Investors, said non-agency MBS investors weren’t involved in negotiations for the national servicing settlement and haven’t been involved in ongoing discussions regarding Chase. He said using funds from non-agency MBS to remedy allegations of inappropriate, unlawful or illegal behavior on behalf of an issuer or servicer makes it harder for investors to price risk. “This consequently makes...

Wells Fargo claimed partial victory after a Manhattan federal district court judge dismissed certain claims against it in a government lawsuit alleging the bank lied about the quality of defaulted mortgages insured by the FHA. District Court Judge Jesse Furman ruled that legal injury claims based on events that happened prior to June 2009 were time-barred and that the government had waited too long to file a lawsuit. He also threw out claims of negligence and unjust enrichment. On the other hand, Furman let stand claims under the Financial Institutions Reform, Recovery and Enforcement Act of 1989, which the ...