“The private-label market is showing new signs of life,” according to Standard & Poor’s, which predicted that banks are likely to increase their securitization of jumbo mortgages. In a report released late last week, S&P projected $14 billion in non-agency jumbo MBS in 2013. Redwood alone set a goal of issuing $7 billion in non-agency MBS this year and is on pace to exceed that volume, helped by a pending $425 million deal, its sixth of the year. PennyMac Mortgage Investment Trust is also aiming to issue a non-agency jumbo MBS in the Redwood mold in the third quarter of 2013. JPMorgan Chase and EverBank Financial issued...[Includes one data chart]

Credit quality for global structured finance securities fell for the sixth consecutive year in 2012, again led by U.S. residential MBS, according to Standard & Poor’s. Looking at downgrade and default trends from 1978 through 2012, S&P found that downgrades were less pervasive last year than in previous years. Nonetheless, the mild but slow global economic recovery continues to hurt the performance of MBS and other structured finance securities for the sixth straight year. Its lagging effect means that credit quality may continue to see moderate deterioration, the rating agency said. While poor credit quality appears...

Moody’s Investors Service said it would not have given its highest rating to the jumbo mortgage-backed security issued last week by JPMorgan Chase because of concerns about the deal’s representation and warranty framework and the lack of risk retention by Chase. DBRS, Fitch Ratings and Kroll Bond Rating Agency gave JPMorgan Mortgage Trust 2013-1 AAA ratings with credit enhancement of 7.40 percent on the top-rated tranche. The rating services said the credit enhancement on the deal was ...

Ginnie Mae issuance fell in the first quarter of 2013 but was easily offset by significant gains from a year ago, according to Inside FHA Lending’s analysis of FHA data. Mortgage-backed securities production at the government facility dropped 5.1 percent to $104.1 billion in the first quarter but increased 28.6 percent year-over-year , which was more than enough for an offset. The securities were backed mostly by FHA and VA loans with a combined total of $99.33 billion. Federally guaranteed rural housing loans totaling $4.84 billion were also in the mix. Wells Fargo and Chase Home Finance led the Ginnie Mae market with a combined ... [1 chart]

Applications for purchase mortgages surged last week as FHA borrowers rushed to get their applications in before April 1, when higher FHA annual insurance premiums took effect, according to the Mortgage Bankers Association’s latest weekly survey of mortgage loan applications. The boost in total purchase applications for the week ending March 29 was fueled by a nearly 7.0 percent increase in government-backed purchase applications, the MBA noted. “This [increase] was likely driven by borrowers applying for loans prior to the scheduled increase in FHA premiums that took effect on April 1,” said Mike Fratantoni, the MBA’s vice president of research and economics. “On a year-over-year basis, purchase applications are up about 4 percent, in line with the trend we are seeing in home sales volume.” The 10 percent annual premium increase, the third in two consecutive years, applies...

Moody’s Investors Service issued a “special comment” this week to warn that the new non-agency jumbo MBS issued by JPMorgan Chase would not have received a AAA rating from Moody’s, had the firm been asked to rate the deal. The rating service raised concerns about representations and warranties and a lack of risk retention on the deal.

The key to advancing tomorrow’s big picture housing finance reform should begin today through a series of smaller steps starting with targeted, nearly ready-to-go reductions to Fannie Mae’s and Freddie Mac’s credit risk, according to a proposal by Moody’s Analytics.

Banks and rating services have strong concerns regarding proposed revisions to the Basel securitization framework that would impact capital requirements for securities holdings. They warn that the proposal would discourage banks from participating in the securitization markets.In December, the Basel Committee on Banking Supervision proposed a revised securitization framework it said would make capital requirements more prudent and risk sensitive, mitigate reliance on external credit ratings and reduce the so-called cliff effects in capital requirements. The BCBS proposed two possible hierarchies for assigning capital, enhancements to current ratings-based approaches, and new approaches.

Mary Jo White, the nominee to chair the Securities and Exchange Commission, said this week that enforcement actions against Wall Street firms and implementation of rules relating to credit ratings will be two of her many priorities if she is confirmed as head of the SEC. Industry analysts suggest that the Senate will easily confirm her nomination. “At the SEC, there’s no institution too big to charge,” White said at a hearing this week by the Senate Committee on Banking, Housing and Urban Affairs. The comment was...

The U.S. Supreme Court last week unanimously decided a securities fraud case that could cause the Securities and Exchange Commission to act sooner rather than later in bringing enforcement actions against MBS fraud. In Gabelli et al. v. Securities and Exchange Commission, SCOTUS ruled that in an SEC action to recover civil penalties, the five-year statute of limitations begins ticking when the fraud occurs, not when it is discovered. Reversing an opinion by the U.S. Court of Appeals for the Second Circuit, SCOTUS rejected...