Banks and thrifts saw another drop in their MBS holdings in the first quarter of 2013 despite holding their own against the Federal Reserve’s voracious appetite for agency MBS. A new Inside MBS & ABS analysis of bank and thrift call reports reveals that industry investment in residential MBS fell 1.1 percent during the first quarter of 2013 to $1.562 trillion. That was down 4.4 percent from the record $1.634 trillion of MBS held in portfolio by banks and thrifts at the end of the first quarter of last year. Banks reported...[Includes two data charts]

Investors are paying more for vintage non-agency MBS with repurchase disputes and pending settlements than securities not involved in representation and warranty litigation, according to analysts at Amherst Securities Group. The increased pricing comes as the proposed $8.5 billion settlement on non-agency MBS issued by Countrywide Financial nears its conclusion. In the past year, pricing on non-agency MBS involved in rep and warrant litigation outperformed securities not subject to such lawsuits, according to Amherst. “It appears these securities received different treatment, as investors likely included recovery cash flows, and priced the bonds accordingly,” the analysts said. As an example, Amherst pointed...

Ginnie Mae officials are moving ahead to create a blueprint for consolidating its two MBS programs, although some industry experts say the proposal could cost investors $5.5 billion. The agency got considerable backing from a variety of stakeholders for its “straw man” proposal to shift to a single MBS program based on the existing Ginnie II, said John Getchis, senior vice president in Ginnie’s capital markets office. “We got...

Mortgage lenders that specialize in refinance lending have made a killing the past few years, especially call center operations with state-of-the-art technology. But is now the time for these firms to take their chips off the table or ponder a merger with more traditional lenders that have ties to real estate brokers and homebuilders? Paul Reddam, founder and president of CashCall, a top 30 lender, told Inside Mortgage Finance that he would be open to selling the company. “We would entertain an offer at any time,” said Reddam, who first made a name for himself in mortgages with Ditech Lending early last decade. Reddam noted...

Real estate investment trusts that specialize in the MBS market saw another decline in the industry’s aggregate holdings during the first quarter, although the trends varied considerably among different institutions, according to a new Inside MBS & ABS analysis of REIT earnings reports. A group of 16 publicly traded mortgage REITs held a combined portfolio of $345.9 billion of MBS as of the end of March, down 3.8 percent from the previous quarter. That was still 16.3 percent higher than year-ago levels, but REIT MBS holdings peaked in the third quarter of last year, just as the Federal Reserve launched the third round of its quantitative easing program. The vast majority of REIT mortgage securities holdings, 95.4 percent, were...[Includes one data chart]

Although Redwood Trust’s soup-to-nuts approach to representations and warranties has dominated the fledgling recovery in jumbo mortgage-backed securities issuance, some experts think a shorter term alternative may gain popularity among issuers. It’s important for investors and rating services to anticipate putbacks in jumbo MBS, Peter Sack, a managing director at Credit Suisse, said during a panel session at the recent secondary market conference sponsored by the Mortgage Bankers Association ...

Issuers of non-agency mortgage-backed securities should disclose when they seek a rating from a firm and ultimately decide not to hire the firm, according to a variety of non-agency participants. “If one rating is 7 percent subordination and the other is 15 percent, we don’t need to accept the 15 percent subordination, but we do need to disclose the 15 percent subordination opinion to investors,” Martin Hughes, CEO of Redwood Trust, said this week at a roundtable hosted by the Securities and Exchange Commission ...

Investors in subordinate tranches of recently issued non-agency jumbo mortgage-backed securities have seen strong returns on the investments. Real estate investment trusts have focused on the assets, which are likely to be subject to risk-retention requirements going forward. “We like the loan assets and the ability to diversify our funding in this manner where we don’t have a duration gap, there is no margin risk, and the assets and liabilities amortize and prepay at the same rate, eliminating the need for ...

After years of holding onto investments in non-agency mortgage-backed securities even as prices declined significantly, the government-sponsored enterprises are preparing to sell some of their $101.5 billion in non-agency MBS holdings. Freddie Mac is offering $1.0 billion in non-agency MBS for sale with plans to unload as much as $5.0 billion this year, if pricing for the securities remains strong. A spokesman for the GSE said the sales are part of an effort to meet goals set by ... [Includes one data chart]

As more firms contemplate issuing jumbo MBS, there are growing concerns that there could be a few speed bumps along the way, namely rising whole loan prices, and an increase in the cost of money for investors that use swaps to fund their purchases of the AAA-rated tranches. The increase in whole loan prices is less of a concern, because it was somewhat anticipated given the “hot” nature of the market. Over the past few months, prices for jumbo whole loans have risen to as high as 103, compared to 101 and 102 last year. Craig Cole, a jumbo consultant and a former top production manager at Union Bank, San Francisco, told...