Most observers have focused on the impact the proposed risk-retention rule would have on non-agency MBS, but key industry groups say the proposed rule attempts to “fix” what isn’t broken – the relatively trouble-free non-mortgage ABS market. “If the risk-retention rules are not appropriately designed to accommodate existing market prac-tices, we risk an immediate and significant reduction in the availability of auto loans, student loans, credit cards and business credit throughout our country without gaining...

Stated-income lending, once a staple of the non-agency market, has not disappeared completely. A few portfolio lenders currently offer the loans, largely to wealthy borrowers looking for jumbo mortgages.In 2006, 54.6 percent of mortgages in non-agency mortgage-backed securities were originated based on alternative, stated or no documentation, according to the Inside Mortgage Finance MBS Database. The mortgages generally performed extremely poorly as borrower income was often overstated. However, private wealth lenders – including California-based...

Ginnie Mae has raised the servicing fee compensation for its Home Equity Conversion Mortgage-Backed Securities (HMBS) program. Currently issuers receive either a flat 6-to-75 basis points monthly servicing fee or a 25-75 bps servicing fee based on a portion of the mortgage interest rate. Effective for HMBS with an issue date on or after July 1, 2011, issuers must select a servicing fee margin of at least 36 bps and not exceeding ...

The mortgage securitization rate hit a record 94.6 percent during the first quarter of 2011 due to huge fluctuations in primary market production trends over the past six months, according to a new analysis by Inside MBS & ABS. The first-quarter securitization rate was up sharply from 84.9 percent for all of 2010, and the rate topped 100.0 percent in the agency mortgage markets. The huge securitization rate numbers stemmed...[Includes one data chart]

A revival in the non-agency MBS market may still be years away because of competing and seemingly contradictory government objectives for housing finance, according to a new analysis from Standard & Poor’s. The government is doing many things all at once to resuscitate the housing market and hasten economic recovery, but those efforts may actually place recovery on a slow track, said Erkan Erturk, an S&P research analyst and author of the report. Erturk concludes that the housing downturn drove the securitization market away from...

The future size and form of the non-agency market continue to be debated even as a number of market participants take significant steps toward reviving issuance of non-agency mortgage-backed securities. One thing is certain: Redwood Trust is no longer alone in its efforts to revive the non-agency market.Goldman Sachs has reportedly acquired more than $1.0 billion in jumbo mortgages via the conduit it established last year. The investment bank is reportedly paying a premium for the loans and plans to issue a non-agency MBS this year. This week, Shellpoint Partners, a specialty finance company, acquired...

Risk-retention rules proposed by federal regulators could limit a popular form of non-prime risk retention, perhaps unintentionally. The treatment of excess spread on non-agency jumbo mortgage-backed securities is also a concern. Tom Deutsch, executive director of the American Securitization Forum, warned that excess spread retained by a deal’s sponsor would not count as risk retention under the qualified residential mortgage proposed rule. In securitizations of non-prime loans, the excess spread typically would be treated as the...

Statutes of limitation will soon force undecided non-agency mortgage-backed security investors into action, according to industry attorneys. Josh Silverman, counsel at Pomerantz Haudek Grossman & Gross, noted that many investors will lose buyback claims if they do not act shortly. In May, Option One Mortgage was the latest non-agency MBS issuer to be hit with repurchase requests. A group of investor clients organized by Talcott Franklin claimed that Option One improperly...

Officials with American Home Mortgage Servicing have proposed a plan that they claim will prompt principal-reduction loan modifications without strategic defaults by borrowers. The proposal involves short sales – not of homes owned by distressed borrowers – but of distressed mortgages held by non-agency mortgage-backed securities.Jordan Dorchuck, an executive vice president, chief legal officer and secretary at American Home, submitted the proposal to the Treasury Department in May. He estimated that...

The impending overhaul of the government-sponsored enterprises’ servicing guidelines will likely have a negative impact on the servicing of non-agency mortgages, according to industry analysts. The agency servicing overhaul includes financial incentives and penalties, which prompted a warning from Moody’s Investors Service. “Because of the incentives and penalties, servicers will likely shift their focus to loans backing the GSEs’ MBS and away from loans in private-label MBS,” Moody’s said. “This shift will mean that...