Federal regulators faced with finalizing controversial rules on risk retention in non-agency MBS, ABS and commercial MBS transactions of the future are considering a “fair-value” approach instead of the controversial premium capture cash reserve account. Although no details on the proposal are available, the American Securitization Forum recently provided general views on how fair value calculations of an issuer’s risk-retention requirement could replace the PCCRA. The group said the change could be “a significant improvement” over the PCCRA, which could have wreaked havoc on the securitization market. The PCCRA, which would have required issuers to hold in reserve any premium they earned in selling assets to a securitization trust, was...

The volume and market share of non-agency jumbo mortgage-backed security issuance increased significantly in 2012 compared with other post-crisis years. However, volume remains well below activity seen even before the 2005 boom in non-agency MBS issuance. Some $3.46 billion in non-agency jumbo MBS were issued last year, according to the Inside Mortgage Finance MBS Database, more than four times the volume issued in 2011. Redwood Trust issued six deals last year totaling ... [Includes one data chart]

After including a significant amount of ARMs in its first deal of 2013, Redwood Trust relied largely on 30-year fixed-rate mortgages for its second non-agency jumbo mortgage-backed security of the year, according to presale reports released this week. The $666.13 million Sequoia Mortgage Trust 2013-2 is set to receive a triple-A rating with characteristics largely similar to other recent issuance from the real estate investment trust. While ARMs accounted for 21.0 percent of the dollar volume of SEMT 2013-1 ...

The Federal Housing Finance Agency and General Electric this week settled a lawsuit filed by the FHFA in 2011 regarding $549.0 million in non-agency mortgage-backed securities purchased by Freddie Mac. The settlement is the first on the FHFA’s 18 pending non-agency MBS lawsuits. The terms of the settlement were not disclosed. Residential Capital agreed to pay $297.6 million to Fannie Mae this week, prompting the government-sponsored enterprise to drop its objection to ResCap ... [Includes four briefs]

The non-agency jumbo MBS market in 2012 posted its best year since the cratering of the U.S. housing market and financial market collapse back in 2008, and increased regulatory clarity may spur the recovery further in 2013. A total of $3.46 billion of non-agency jumbo MBS were issued last year, according to a new ranking and analysis by Inside MBS & ABS. In the pre-crash years, that level of issuance didn’t add up to a decent week in productivity. But last year’s prime non-agency MBS issuance was...[Includes three data charts]

Recent changes announced by the Basel Committee for pending capital standards will increase demand from private capital for non-agency MBS, according to industry participants, but some say the benefit may be muted. Last week, the Basel Committee adjusted the liquidity coverage ratio for Basel III capital requirements by expanding the definition for “high quality liquid assets” to include Level 2B assets. Among the assets newly eligible are certain residential MBS rated AA or higher, subject to a 25.0 percent haircut. “The Basel Committee made...

Moody’s Investors Service recently implemented a significant overhaul of its methods for assessing servicers of non-agency MBS, replacing criteria issued in 2001. Among other changes, the new standards expand the data sources Moody’s will look at to include more timely figures from trustees and servicing performance for the government-sponsored enterprises. The analysis by Moody’s includes monthly loan-level data from the servicer if provided on a timely basis, monthly performance data from the trustee when available, and GSE servicing data as needed. Previously, the rating service largely relied on loan-level portfolio data from servicers. “The trust data is...

The residential mortgage servicing market continued its incredible shrinking act during the third quarter of 2012, falling below the $10 trillion mark for the first time since early 2006. The Federal Reserve reported that total single-family mortgage debt outstanding declined by 0.9 percent during the third quarter, drifting down to $9.926 trillion. The supply of mortgage servicing has been in a steady decline since peaking at $11.179 trillion in March 2008. The agency servicing market was...[Includes two data charts]

Newcastle Investment Corp., a behind-the-scenes player in Nationstar’s recent purchase of $215 billion of servicing rights from Bank of America, plans to spin off part of its business into a new unit called New Residential Investment Corp. According to a filing with the Securities and Exchange Commission, NRIC will invest in MBS, excess mortgage servicing rights, nonperforming loans and other asset classes. The company hopes to complete the spin-off by the end of March. The shares, though, will be spun-off...

The Obama administration is making a renewed push in 2013 for a government-backed non-agency refinance program, potentially the third major phase of the Home Affordable Refinance Program. However, there appear to be numerous hurdles to using the government-sponsored enterprises to help refi non-agency borrowers and a similar proposal using the FHA has yet to gain widespread support in Congress. Under the latest HARP 3.0 proposal, Fannie Mae and Freddie Mac would refinance certain non-agency mortgages with negative equity, waive mortgage insurance requirements and charge the borrowers higher guaranty fees. The proposal would require approval from Congress. “After taking significant taxpayer bailouts, the GSEs’ fiscal condition is...