Moody’s Investors Service this week announced a proposed update to its rating criteria for jumbo mortgage-backed securities. Under the proposed criteria, collateral modeling will be based on a new version of Moody’s Individual Loan Analysis tool as opposed to the portfolio analysis tool Moody’s has used since 2008. Navneet Agarwal, a managing director at Moody’s, said the proposed changes set “a new standard for transparency” ... [Includes six briefs]

Standard & Poor’s said it is working with the Securities and Exchange Commission to address issues raised by the enforcement staff in connection with botched ratings of several commercial MBS transactions in 2011. A spokesperson for S&P said the rating agency and its parent company, McGraw Hill Financial Inc., are cooperating with the SEC after receipt of a “Wells Notice” last week indicating both companies may soon be the target of a regulatory enforcement action. The SEC notice is...

Smaller and mid-size mortgage lenders were more likely than larger lenders to say their credit standards tightened over the past three months and will tighten more in the next quarter, while larger lenders were more likely to say their credit standards eased in the prior quarter and will continue in the next, according to results of a new lender survey announced by Fannie Mae. The divergent view of credit standards between larger lenders and others is among the key findings of the government-sponsored enterprise’s new Mortgage Lender Sentiment Survey. The quarterly survey focuses on the supply side of the mortgage business and dovetails with Fannie’s monthly national survey of consumers, which provides current information on the demand side of housing. Lender survey results collected during the first two quarters of 2014 showed...

Redwood Trust took three months off from issuing jumbo MBS but came back with something of a doozy this week: a $306.05 million deal that will include some loans that don’t meet standards for qualified mortgages and some loans that weren’t subject to third-party due diligence reviews. Sequoia Mortgage Trust 2014-2 is set to receive AAA ratings with credit enhancement of 7.75 percent on the top-rated tranche. While the credit enhancement requirements are somewhat high, a jumbo MBS from Redwood in November had even higher credit enhancement levels, suggesting that the non-QMs and lack of full due diligence aren’t a major concern. Only three of the 438 mortgages to be included in the deal are...

Fitch Ratings has consolidated a number of key rating drivers into updated master rating criteria for residential MBS backed by newly originated and seasoned residential mortgages. The latest report replaces the July 2013 RMBS criteria, and while no material changes have been made to the overarching process, a few tweaks have been made. The important rating drivers that were incorporated include...

The new lenders contributing to jumbo mortgage-backed securities could pose risks to investors in the deals, according to Standard & Poor’s. The rating service said that due diligence and strong underwriting standards currently mitigate the risks, but there are concerns that the lenders with limited track records won’t be able to fulfill representation-and-warranty repurchase obligations. Jumbo MBS have seen contributions from a mix of lenders. The main contributors ...

The Securities and Exchange Commission has largely wrapped up its enforcement on structured finance issues related to the financial crisis, according to current and former officials at the federal regulator. The SEC’s Complex Financial Instruments Unit is now focusing on more recent issues in the structured finance sector. “The unit has now shifted its attention to the next frontier, and I expect it to zero in on the structuring, rating, valuation, sale, and use of other types of complex financial products, such as commercial MBS, structured notes and credit default swaps,” Andrew Ceresney, the director of the SEC’s division of enforcement, said in May. Stephen Crimmins, a partner at the law firm of K&L Gates who previously worked at the SEC for 14 years, said...

Morningstar Credit Ratings late last week published new rating criteria for non-agency MBS. While the firm has been active in the commercial MBS sector, the non-agency MBS rating criteria Morningstar released in 2012 never caught on with issuers. “We have taken a fresh, holistic approach to the residential MBS rating process to help investors gauge the relative default risk of a security against its peers,” said Vickie Tillman, president of Morningstar. Tillman joined the rating service in August after more than 30 years at Standard & Poor’s. Morningstar said...

The International Organization of Securities Commissions is working on a set of “good practices” to provide to the vast majority of the world’s securities regulators as part of an effort to prompt securities investors to reduce their reliance on credit ratings. While participants in the U.S. structured finance industry suggest that reliance on credit ratings diminished after the financial crisis, many funds continue to have guidelines that reference credit ratings. Some investors, for example, couldn’t buy into risk-sharing transactions from the government-sponsored enterprises unless the deals received investment-grade ratings. IOSCO recently issued...

The volume of outstanding commercial MBS continues to hit record highs and the number of active lenders is near levels seen before the financial crisis. While issuers suggest that the industry is much different than in 2007, there are concerns about looser underwriting. Some $86.48 billion in commercial MBS was issued in 2013, according to the Inside Mortgage Finance MBS Database. And while issuance in the first quarter of 2014 was lower than three of the four quarters in 2013, Standard & Poor’s projected this week that issuance of commercial MBS could hit $90.0 billion this year. The issuance has been prompted...