Participants in the non-agency mortgage-backed security market are concerned about the strength of the sector as interest rates and other pricing metrics have increased significantly in recent weeks. “When the 10-year Treasury rate started to rise recently and the mortgage interest rate spread out by 20 basis points, the non-agency MBS market spread out by 50 basis points,” said Lewis Ranieri, chairman of Ranieri Partners, at a forum hosted by the Bipartisan Policy Center last week. “And given there’s ...

For the past two years, Bank of America has been the poster child of legacy servicing sales, but it may soon have some company. According to industry advisors who specialize in the mortgage servicing rights market, JPMorgan Chase and a few other large banks with seasoned portfolios are developing “deal teams” to explore their options. Chase’s name has surfaced from time to time as a select seller of legacy product. But it also has been a selective buyer of servicing, including the purchase last fall of $70 billion in rights from MetLife, which was closing out its interest in the mortgage business. A spokeswoman for Chase declined...

Private MBS investors will likely see reduced competition from the Federal Reserve later this year if the central bank begins to slow down its purchases of agency MBS, but there is also likely to be a sharp drop in new MBS supply at the same time. The Federal Open Market Committee made no changes in its policy of adding $40 billion a month to its massive $1.165 trillion portfolio of agency MBS, in addition to reinvesting payments from its agency debt and MBS holdings. It also promised to closely monitor economic and financial developments and stands prepared to increase or decrease its MBS purchases. But Fed Chairman Ben Bernanke later indicated...[Includes two data charts]

Ambac Assurance Corp. may proceed with its fraud claims against JPMorgan Chase in connection with residential MBS that Ambac insured, a New York state judge ruled last week. In March 2012, Ambac filed suit against JPMorgan Chase, alleging fraudulent marketing of residential MBS by Bear Stearns and Co., which was acquired and renamed JPMorgan Securities. The suit claims that Ambac had to pay more than $200 million in insurance claims to investors from seven Bear Stearns securitization transactions that lost $1.8 billion. Ambac contends...

It’s no secret that speculators wide and far are betting the common and preferred shares of Fannie Mae and Freddie Mac could rise significantly as their profits continue to stay robust. But according to James Lockhart, who once headed the Federal Housing Finance Agency, these speculators are likely throwing their money away. Speaking at a recent housing forum sponsored by the Bipartisan Policy Center, he noted that the Treasury Department owns the senior preferred of the GSEs and the senior stock “sits above” the junior shares. Lockhart said the government preferred will never be paid back, which means the junior holders are out of luck. Lockhart, who now serves as vice chairman of WL Ross & Co., said he does not own any stock in the two nor does he plan on buying any.

Investors have significantly reduced their home-purchase activity in recent months, according to the latest Campbell/Inside Mortgage Finance HousingPulse Tracking Survey. Current homeowners and first-time homebuyers have filled the void and are much more likely to finance a home purchase with a mortgage compared to investors. Investors accounted for 20.2 percent of home purchases in May, based on the three-month moving average, the third consecutive decline in investor share. Market share for both current homeowners and first-time homebuyers increased in recent months, with current homeowners accounting for 43.8 percent of home purchases in May. The trends present...

The Securities and Exchange Commission sought changes large and small before approving the non-agency MBS shelf registration statement of Shellpoint Partners in May. The scrutiny is similar to that faced by Redwood Trust when it renewed its shelf this year, showing that the SEC wants particular disclosures to accompany new non-agency MBS issuance. The back and forth between the SEC and Shellpoint started in November, when the agency sent Shellpoint initial comments on the proposed prospectus that would accompany non-agency MBS issued by the firm. The SEC requested greater disclosure and corrections to a number of issues. The SEC said...

The Structured Finance Industry Group said it had substantive discussions with staff members at the Securities and Exchange Commission this week regarding loan-level data formats for mortgages. The SFIG said it plans to work with the Mortgage Bankers Association to potentially enhance the MBA’s Mortgage Industry Standards Maintenance Organization data fields. The SFIG said it is considering pushing for MISMO standards to be used in the government-sponsored enterprises’ risk-sharing ... [Includes three briefs]

Lloyds Banking Group was able to sell a sizable portfolio of vintage non-agency MBS this week at attractive prices. Additional sales of vintage non-agency MBS are expected as a strong housing market and demand from investors has pushed prices above the marks some institutions had placed on their holdings. Last week, Lloyds offered a bid list of $8.7 billion in non-agency MBS, largely non-investment grade, on an all-or-nothing basis. The British financial institution said the sale will close this week for a cash consideration of $5.05 billion, 22.3 percent higher than the book value that Lloyds had assigned the assets. “While Lloyds’ book value may not be...

At first, residential origination volumes were slow at Citadel Loan Servicing Corp., a new player in a lonely market: nonprime production. But that was two months ago, when the Irvine, CA-based company first opened its doors. “People are finally calling us,” said Dan Perl, CEO of the privately held nonbank. By the time June ends, the company will have funded almost $6 million for the month, maybe as much as $8 million. The origination numbers, of course, are miniscule compared to monthly conventional volume, but in the “new” nonprime space Citadel is probably doing more business than the two-dozen or so nonprime or hard money lenders that are quietly toiling away in selected markets. For the industry to revive...