A transparency feature included in the Dodd-Frank Act aimed at helping MBS and ABS investors understand the representations and warranties on a transaction has created a significant amount of work for rating services with little benefit for investors, according to officials at ratings firms. Since June 2015, rating services have been required by the DFA to compare the reps and warrants on a transaction they’re rating with a benchmark set of reps and warrants for that asset class. These 17g-7 reports often span hundreds of pages, detailing similarities and differences between the reps and warrants on a specific transaction compared with a set of benchmarks established by the rating services. Claire Mezzanotte, a group managing director and head of global structured finance at DBRS, said...

Online consumer lender Prosper Marketplace, based in San Francisco, recently finalized a deal with a consortium of institutional investors to purchase as much as $5 billion of the lending platform’s unsecured consumer loans during the next two years. The consortium comprises investment bank Jefferies Group LLC and three asset managers: affiliates of New Residential Investment Corp., Third Point LLC, and an unnamed entity of which Soros Fund Management LLC serves as principal investment manager. Under the terms of the deal, the consortium will earn...

Ginnie Mae production fell substantially in February from January as the government-insured lending market continued to lose steam in the first quarter of 2017. Ginnie mortgage-backed securities issuance fell 24.0 percent from January as fewer purchase and refinance loans were pooled for securitization, bringing February’s total issuance to just $32.2 billion. Year-over-year Ginnie MBS issuance, on the other hand, increased by 6.2 percent. The government-insured market set an all-time record of $545.0 billion in originations during 2016, a whopping 31.0 percent jump from the previous year. That total eclipsed previous records for originations of FHA, VA and rural housing loans guaranteed by the U.S. Department of Agriculture, according to data compiled by affiliate Inside Mortgage Finance. In addition, government-insured lending accounted for a record ... [ 3 charts ]

By creating liquidity in Ginnie Mae mortgage-backed securities, liquidity coverage ratio (LCR) policies have attracted lenders – mostly nonbanks – whose funding relies more on securitizations – toward FHA loan originations, according to a new paper published by academicians. The paper, “Nonbanks and Lending Standards in Mortgage Markets: The Spillovers from Liquidity Regulation,” maintains that such lenders approve more FHA loans because they can sell the loans easily, given the high liquidity of the securitized product. The greater liquidity in Ginnie MBS has resulted in higher market share and eased standards especially for nonbanks and lenders with less deposit funding. It also has led to tighter standards for conventional mortgages, which are eligible for government sponsored enterprise securitization, wrote Pedro Gete and Michael Reher, researchers in the ...

Planned revisions to the Financial CHOICE Act would loosen regulation of rating services, according to a recent memo by Rep. Jeb Hensarling, R-TX, chairman of the House Financial Services Committee. Hensarling sent the memo to the leadership team of the House Financial Services Committee this month detailing changes that will be included in hise so-called CHOICE Act 2.0. The expected revisions to standards for nationally recognized statistical rating organizations go well beyond the rollbacks included in the version of the CHOICE Act that was introduced in September. The 2016 bill would have repealed...

Securities investors will soon be able to have a taste of the revenues generated by Long Island iced teas and Jack Daniel’s glazed chicken strips as TGI Friday’s is set to issue a $450.0 million whole-business securitization. The planned TGIF Funding LLC Series 2017-1 received ratings from Kroll Bond Rating Agency and S&P Global Ratings this month. KBRA assigned BBB ratings to both tranches of the security while S&P assigned BBB- ratings. The deal follows...

Rating services appear to be taking differing approaches to rating nonprime MBS backed by new originations. The first nonprime MBS from an affiliate of Invictus Capital Partners received preliminary AAA ratings from Kroll Bond Rating Agency, Morningstar Credit Ratings and S&P Global Ratings. Those three firms did not rate...

The first nonprime mortgage-backed security from an affiliate of Invictus Capital Partners will be stocked with loans that have some unique features. Kroll Bond Rating Agency, Morningstar Credit Ratings and S&P Global Ratings placed preliminary AAA ratings on the deal last week. The planned $145.02 million Verus Securitization Trust 2017-1 differs in a number of ways from the $225.75 million COLT 2016-3 Mortgage Loan Trust, the nonprime MBS from an affiliate of Lone Star Funds ...

Fitch Ratings recently assigned “average” assessments to three originators and aggregators involved in the nonprime mortgage market, the same grades the firm assigned to Caliber Home Loans. Fitch evaluated Angel Oak Home Loans, Angel Oak Mortgage Solutions and Citadel Servicing as originators of nonprime mortgages. And the rating service reviewed Deephaven Mortgage as an aggregator of nonprime mortgages. The assessments by Fitch will help pave the way for ...

There will likely be a notable increase in the issuance of mortgage-backed securities backed by newly originated nonprime mortgages, according to Fitch Ratings. As many as eight firms are looking to join Lone Star Funds in issuing rated deals, though issuance isn’t expected to get anywhere near the levels seen in the run up to the financial crisis. Some $999.5 million in nonprime MBS was issued in 2016, according to the rating service. “Fitch estimates those figures could double in 2017, and ...