Two Harbors Investment is preparing to issue a $267.67 million jumbo mortgage-backed security, according to a preliminary term sheet obtained by Inside Nonconforming Markets. The deal is scheduled to close Aug. 5, nearly a year after the only other jumbo MBS issued by Two Harbors. Agate Bay Mortgage Trust 2014-1 is backed by 30-year fixed-rate mortgages from a variety of lenders, led by RPM Mortgage with a 12.8 percent share, New York Community Bank ...

While banks have plenty of capacity to retain jumbo mortgages in portfolio, the top two contributors to jumbo mortgage-backed securities issued in the second quarter of 2014 were actually banks, according to a new ranking and analysis by Inside Nonconforming Markets. First Republic Bank and JPMorgan Chase were the top two contributors to the scant four jumbo MBS during the quarter. And since the start of 2013, three of the top five ... [Includes one data chart]

The risk-retention standard federal regulators are leaning toward establishing isn’t what was intended under the Dodd-Frank Act, according to one of the main authors of the DFA. Barney Frank, a former Democrat congressman from Massachusetts, said aligning the definition for qualified mortgages with the definition for qualified residential mortgages would be a “grave error.” The DFA required federal regulators to establish standards for QRMs ...

Statebridge Company has received a mid-tier rating for subservicing mortgages from Fitch Ratings. The nonbank servicer was established in 2008 and is owned by FrontRange Capital Partners, along with Kevin Kanouff, Statebridge’s CEO and David McDonnell, the servicer’s managing director.As of the end of the second quarter of 2014, Statebridge subserviced $1.08 billion in mortgages, according to Fitch ... [Includes five briefs]

In the past two weeks, BlackRock has completed auctions of vintage non-agency MBS with a total unpaid principal balance of $8.1 billion. While the sales had the potential to push too much supply into the market, investor demand for the securities appears to have been strong. The market absorbed the first auction, for $3.7 billion in mostly subprime MBS from 2006, “without a hiccup,” according to analysts at Barclays Capital. Credit Suisse submitted winning bids on all of the non-agency MBS auctioned by BlackRock in the past two weeks, with most of the securities quickly being placed with other investors, indicating strong demand. Of the $3.7 billion in non-agency MBS auctioned last week, 96 percent of the balance was placed...

The conditional default rate, or annualized liquidations, of non-agency MBS loans rose 20 basis points to 4.92 percent in the second quarter, after declining for seven consecutive quarters from 9.76 percent in the second quarter of 2012, Fitch Ratings reported this week. “The recent turnaround in the trend can be partly attributed to a growing portion of bank-held real estate owned properties, which typically liquidate much faster than those that are still in the foreclosure process,” said Fitch. The rate of completed foreclosures to REO property has trended higher for four consecutive quarters. The previous decline in the CDR was driven...

The modest rebound in non-agency MBS issuance during the first three months of 2014 fizzled during the second quarter of the year, according to a new analysis and ranking by Inside MBS & ABS. A total of just $1.60 billion of non-agency MBS were issued during the second quarter, a 62.7 percent decline from the previous period. It was the lowest quarterly volume in new issuance since the financial crisis of 2008. On a year-to-date basis, new issuance was...

Re-securitization activity is above levels seen last year because of compressed yields on vintage non-agency MBS, according to industry analysts. Re-securitizations – all of which are privately placed and typically without a rating – can offer investors more credit risk and leverage than vintage non-agency MBS. In the first half of 2014, 20 re-securitizations of real estate mortgage investment conduits totaling $5.90 billion were issued, according to Bank of America Merrill Lynch. Activity is picking up: June alone accounted for 28.3 percent of the issuance. “In an environment where yields have compressed in the vintage non-agency space, subordinate re-REMIC classes can offer...

As the Securities and Exchange Commission continues to consider how to reform the rating process for structured finance transactions, including non-agency MBS, industry analysts affiliated with the Brookings Institution suggested that the fix doesn’t require altering the issuer-pay model that has been in place for more than 40 years. Instead, the SEC should help establish transparent, numerical benchmarks, according to two industry participants, shifting away from the current system of letter-based ratings that are also used for corporate debt and sovereign debt. Ann Rutledge, a founding principal at R&R Consulting, a credit rating service, and Robert Litan, a nonresident senior fellow at The Brookings Institution, detailed their proposal in an economic study recently published by Brookings. “Securities that are rated only in an ordinal fashion – in order of likelihood of default – can be...

CORRECTION: The jumbo mortgage-backed securities issuers and underwriters ranking published in the July 4, 2014, issue of Inside Nonconforming Markets has been revised due to a data error. The revised chart is available online. Citigroup agreed to a $7.0 billion settlement this week with federal regulators and certain states related to non-agency MBS activities prior to 2009. Associate Attorney General Tony West suggested that ... [Includes seven briefs]