Two Harbors Investment is set to issue its first non-agency jumbo mortgage-backed security. The real estate investment trust is working on building its jumbo conduit operations, but in the meantime, Two Harbors plans to securitize mortgages it purchased from Bank of America. Two Harbors’ $434.17 million Agate Bay Mortgage Trust 2013-1 is set to receive AAA ratings with credit enhancement of 7.70 percent for the top-rated tranche. Mortgages to be included in the security have seasoned for ...

Fitch Ratings updated its loss model criteria for non-agency jumbo mortgage-backed securities this month, including new default estimates that vary by origination channel. Other rating services take the origination channel into account when rating new jumbo MBS, but not necessarily to the extent that Fitch has taken. “Fitch has determined that loans originated through a direct retail channel have a lower default risk than those originated through a broker, correspondent or wholesale channel,” the rating ...

Parties to trustee lawsuits challenging a city’s use of eminent domain to deal with foreclosures are gearing up for a face-off at an injunction hearing Sept. 13 in federal district court in San Francisco. The city of Richmond, CA, the defendant in the lawsuit, has suffered setbacks in the last few days and has yet to make good on its threat to initiate eminent domain proceedings after investor trustees rejected its offer to purchase distressed mortgages for restructuring. Wells Fargo and Deutsche Bank, acting as trustees for a group of ...

As of the midway point in 2013, Fannie Mae and Freddie Mac were only slightly ahead of the pace they will need to maintain this year to reach portfolio-shrinkage targets set by their regulators, according to a new Inside MBS & ABS analysis. Under the revised terms of their bailout agreements, the two government-sponsored enterprises are required to reduce their retained portfolios by 15.0 percent by the end of this year. Through the first six months of 2013, the GSEs had shrunk their mortgage portfolios by 8.7 percent. But the Federal Housing Finance Agency has also directed...[Includes one data chart]

Standard & Poor’s is defending its status as the top rating service in the non-agency MBS market through the first half of 2013, having put its stamp on 39.0 percent of the growing market, according to a new Inside MBS & ABS ranking. S&P has been the top non-agency MBS rating agency over the years but saw DBRS capture the title in 2012 with 54.8 percent of rated transactions. The non-agency ratings business has become significantly more fragmented than it was before the financial collapse, when S&P often rated more than 90.0 percent of the deals that came to market. Both Fitch and Kroll Ratings are...[Includes two data charts]

Mortgage servicing transfers are likely to continue, particularly to nonbanks like Ocwen and Nationstar, with modest effect on most non-agency deals, according to a new study from Barclays Securitized Products Research. Researchers said the valuation effect of these servicing transfers is generally modest for most senior securities, with the exception of some that are likely to benefit from certain factors. Investors should also be aware of potential forbearance-related write-downs in these transferred deals, which may adversely affect subordinate bonds in the structure, they cautioned. The study attributes...

The Department of Justice and the Securities and Exchange Commission filed similar lawsuits this week against Bank of America regarding an $855.67 million non-agency jumbo MBS issued in January 2008. The lawsuits claim that BofA failed to disclose key facts regarding one of the last jumbo deals to be issued before the securitization market essentially closed in 2008. BofA counters that the securities were sold to sophisticated investors that had “ample access” to the underlying data. BofA was the issuer of the security in question – Banc of America Mortgage 2008-A Trust – as well as the originator, servicer, sponsor and depositor, and affiliated entities managed the transaction. The regulators allege...

Some servicers have retroactively applied losses to non-agency MBS from principal forbearance completed long ago even after suggesting that such losses were unlikely. Analysts warn that further losses are likely, at the expense of investors in the senior tranches of non-agency MBS. In May, some 170 non-agency MBS serviced by Ocwen Financial took combined losses of more than $1.0 billion due to accounting for principal forbearance that occurred before July 2012. The retroactive losses should have been reported at the time of the loan modification, according to guidelines for the Home Affordable Modification Program. The losses were included in remittance reports for May after servicing on the deals transferred from Homeward Residential to Ocwen. Later, 231 non-agency MBS serviced by Nationstar Mortgage took...

Redwood Trust had a $2.6 billion pipeline of non-agency jumbo mortgages at the end of the second quarter of 2013. While that usually wouldn’t cause much concern for the real estate investment trust, the loans were originated before interest rates on 30-year fixed-rate non-agency jumbos spiked by 100 basis points. The increase, beginning in mid-May, caused spreads on non-agency jumbo MBS to widen significantly. However, officials at Redwood stressed this week that the non-agency MBS market didn’t ...

President Obama this week endorsed a reduction in the FHA’s high-cost loan limits and called on the Federal Housing Finance Agency and the Department of Housing and Urban Development to consider further decreases to reduce conforming loan limits. The proposal was included in a fact sheet that accompanied Obama’s speech this week on housing. The FHA’s high-cost loan limits are scheduled to be reduced at the end of this year. “HUD and FHFA should closely examine using their existing authorities to reduce ...