New regulations are re-shaping the non-agency MBS market, but economic issues, the ratings process and shifting investor appetite may have more to do with the stalled recovery in the sector, experts said during the American Securitization Forum conference last week in Las Vegas. John Arnholz, a partner at Bingham McCutchen LLP, suggested that the regulators will end up issuing a new proposed rule on risk retention, given the widespread opposition to the original proposal. The proposed premium capture recovery fund idea “came out of nowhere,” he said, adding that there is a good deal of dissent among the six...

Issuance of new non-agency mortgage-backed securities will resume when the financing structure is economical, according to attendees at the American Securitization Forum’s ASF 2012 conference last week in Las Vegas. Just what it will take to make non-agency securitization economical remains to be seen, though some suggest that regulatory uncertainty plays a major factor. “We have not seen much of a test of the non-agency market because it’s not economical,” said Peter Sack, a managing director and co-head of real estate and mortgage finance at Credit Suisse. “The bank portfolio bid is strong.” ...

Redwood Trust’s four non-agency mortgage-backed securities – the latest of which was issued last week – have been generally well received by MBS investors. However, some investors, potential issuers and even the rating services have raised concerns regarding the non-agency MBS ratings process, both for Redwood and for other potential securitizers. A senior official at one of the rating services suggested to Inside Nonconforming Markets that ratings shopping is still occurring, and that the Redwood deals have been rated by the firms with the lowest credit-enhancement requirements ...

Firms participating in the Public-Private Investment Program with a focus on non-agency mortgage-backed securities all took losses in the fourth quarter of 2011 compared with the previous quarter, according to an analysis by Inside Nonconforming Markets. The Oaktree PPIP Fund – which only invests in commercial MBS – was the only public-private investment fund to increase its net internal rate of return since inception in the fourth quarter of 2011, Treasury Department data show. The Treasury cautioned that it is ... [Includes one data chart]

A new proposal by the Obama administration to refinance non-agency mortgages with negative equity could have a major impact on the non-agency market, though approval by Congress appears unlikely. “Borrowers with standard non-GSE loans will have access to refinancing through a new program run through the FHA,” the Obama administration said in a fact sheet released this week. “For responsible borrowers, there will be no more barriers and no more excuses.” The program would require that borrowers ...

The Department of Justice announced last week that it will increase the number of attorneys, analysts, agents and investigators looking into unlawful activities regarding mortgage-backed securities. The emphasis on MBS was directed by President Obama and is part of a new working group involving the DOJ, federal regulators and a number of state attorneys general. The DOJ, Department of Housing and Urban Development, Securities and Exchange Commission and state attorneys general led by New York AG Eric Schneiderman formed the Residential Mortgage-Backed Securities Working Group under the existing Financial Fraud Enforcement Task Force ...

A settlement involving major servicers and state attorneys general could be close, as state AGs have until Feb. 6 to agree to a potential $25 billion settlement. Negotiations on the settlement have dragged on for 15 months and were previously slated to end Feb. 3. Ally Financial, Bank of America, Citigroup, JPMorgan Chase and Wells Fargo would reportedly be included in the settlement. Some $17 billion in penalties paid by the banks would go toward principal reductions, $5 billion would go toward a reserve account that would ... [Includes three briefs]

The mortgage industry is skeptical about President Obama’s proposal for low-cost, non-agency loan refinancing program, administered by the FHA for current, underwater borrowers. Some industry participants called the plan nothing but smoke and mirrors that would likely create unrealistic expectations. But deceptive or not, the proposal first announced by the president in his State of the Union address promises to be different from the earlier, huge unsuccessful FHA experiments in foreclosure prevention – Hope for Homeowners and FHA Short Refinance programs. The proposed refi plan is a combination of ...

Analysts have mixed expectations for residential mortgage servicing in 2012, with some seeing it as a year of foreclosure-prevention reforms and others anticipating a higher level of vigilance in new deals and loan quality. Although issuance of non-agency MBS will be modest again in 2012, new deals will have more comprehensive reviews of originators, more reliable and better-quality loan-level data, and stronger enforcement of breaches of representations and warranties, according to Moody’s Investors Service. New deals will better address legal issues relating to foreclosure challenges. Some of the deals...

The transition to a housing market not completely dominated by agency financing will result in higher costs for borrowers, according to some industry participants at the American Securitization Forum annual conference held this week in Las Vegas. Even proposed risk sharing between non-agency mortgage-backed security investors and the government-sponsored enterprises is cause for concern.“I just don’t see it working all that well,” said Garry Cipponeri, a senior vice president and director of capital markets at Chase Mortgage Banking. He suggested that risk sharing could ultimately...