Economic trends point to continued strong performance for outstanding non-agency MBS, according to Standard & Poor’s. “S&P expects the sector to demonstrate stable characteristics and stable rating trends,” said Jeremy Schneider, a primary credit analyst at the rating service. “Our outlook for collateral performance is strong, and our assessment of the overall sector is stable.” In a report released late last week, S&P said...

Lenders that dabble in loans that don’t pass the qualified-mortgage test are going to be very selective about which borrowers they accept, and the loans are most likely to be held in portfolio, according to speakers at a recent industry conference in New York City. “We have used our balance sheet to retain non-QM loans in certain situations,” said Russell Brady, an assistant vice president at Elevations Credit Union. “This can make sense, but you have to do it in a controlled way with all the controls in place,” he said during a panel at the Secondary Market Conference sponsored by the Mortgage Bankers Association. The QM limit of 43 percent on debt-to-income ratio is...

The Consumer Financial Protection Bureau’s ability-to-repay rule is unlikely to prompt a significant increase in litigation, according to DBRS. The rating service last week released its criteria for non-agency MBS with loans subject to the ATR rule and standards for qualified mortgages. “Although there are no historical ATR claim data to help forecast the rate of borrower challenges, DBRS anticipates that any action against lenders within a securitization trust will be minimal due to the uncertainty of borrower success and significant legal costs that potentially can be incurred.” In addition, third-party due-diligence reviews that confirm ATR compliance and representations-and-warranties obligations that motivate lenders to adhere to underwriting guidelines make litigation less likely, the rating service said. DBRS added...

The Independent Community Bankers of America announced this week that its ICBA Mortgage Solutions added jumbo products to its correspondent offerings. ICBA Mortgage supports community banks’ access to the secondary market for servicing-released programs; the correspondent offerings are provided by LenderLive. The new program includes loan balances of up to $2.0 million. ICBA said the program allows for in-house underwriting and has a no-cross-sell guarantee. “We are pleased to offer a product that will meet jumbo customers’ needs while protecting these valuable relationships,” said Robert Kallio, senior vice president of ICBA Mortgage Solutions. He stressed...[Includes two data charts]

The advance policies of nonbank servicers have led to disruptions in payments to investors in non-agency MBS following servicing transfers from banks, according to Fitch Ratings. The differences are particularly pronounced on jumbo and Alt A deals, with advance disruptions recently concentrated on MBS previously serviced by Bank of America. “Bank and nonbank servicers for residential MBS transactions typically follow the same general advancing guidelines,” Fitch noted. “However, nonbank servicers generally make the determination to stop advancing earlier than bank servicers.” On average, for jumbo MBS and Alt A MBS, nonbanks advance missed...

Fannie Mae this week priced its second credit risk-sharing deal of 2014. The $1.6 billion note is the government-sponsored enterprise’s third and largest transaction under its Connecticut Avenue Securities series since the Federal Housing Finance Agency ordered both Fannie and Freddie Mac to shrink the GSEs’ role in the U.S. housing market last year. In its latest offering – Series 2014-C02 – Fannie said it included reference loans with original loan-to-value ratios of up to 97 percent. Previous C-deal offerings included reference loans with up to 80 percent original LTV ratios. “As the market moves from a refinance market to a purchase-money market, it is...

Rating services and due-diligence firms have plenty of time to analyze originators of jumbo mortgages headed to the securitization market, according to industry experts speaking this week at the Mortgage Bankers Association’s annual Secondary Market Conference in New York. All the rating services are putting greater emphasis on understanding originator business practices as part of evaluating jumbo mortgage-backed securities deals, said Sharif Mahdavian, an analyst at Standard & Poor’s ...

Standard & Poor’s ranked as the top rating service in the non-mortgage ABS market and also claimed the top spot in the sputtering non-agency MBS sphere, according to a new Inside MBS & ABS ranking of first-quarter activity. S&P rated seven of the 11 non-agency MBS issued in the first three months of 2014, or 78.0 percent based on dollar volume. Once the perennial leader in non-agency MBS ratings, S&P’s market share has been around 40.0 percent in recent years. DBRS ranked...[Includes two data charts]

Standard & Poor’s is seeking comments on a proposal for assessing operational risk posed by key transaction parties such as servicers in structured finance transactions. The request for comments follows a similar request from S&P in 2011. “We made a number of changes to the previous request for comment in view of the responses we received and our desire to enhance the risk considerations under the proposed operational risk framework,” said Joseph Sheridan, S&P’s criteria officer. “We also expanded the proposal’s scope. Where we believe operational risk could lead to credit instability and a ratings impact, the proposal would call for rating caps that limit the securitization’s maximum potential rating.” The rating service is proposing...

Bayview Asset Management announced late last week that it will delay the issuance of a non-agency MBS backed by re-performing subprime mortgages with an unpaid principal balance of $215 million. The delay was prompted by concerns about property valuations and loss severity. Standard & Poor’s issued a presale report on Bayview Opportunity Master Fund Trust 2014-9RPL on April 28, and the deal was scheduled to close May 12. The MBS was set to receive a AAA rating from S&P, but the rating service said it withdrew its preliminary rating due to Bayview’s extension of the planned closing date. The delay in closing was prompted...