A new nonprime MBS from an affiliate of Lone Star Funds has two significant distinctions: it’s the first post-crisis nonprime MBS backed by new originations to receive a AAA rating and it’s the largest post-crisis nonprime MBS backed by new originations. COLT 2016-3 Mortgage Loan Trust received AAA ratings from DBRS and Fitch Ratings. “Over the past year, Fitch has become more comfortable with the operational risk of the issuer through extensive due diligence results, multiple ...

The Structured Finance Industry Group released the fifth edition of its RMBS 3.0 green papers last week, featuring a draft deal-agent agreement and proposed bondholder-communication protocols. The green paper effort to revive the non-agency mortgage-backed securities market started in 2013 and now totals 400 pages. “That’s a lot of work for an industry that apparently doesn’t exist,” Richard Johns, SFIG’s executive director, said last week at the trade group’s annual ...

Proposals aimed at reviving the issuance of non-agency mortgage-backed securities have done little thus far to get volumes anywhere near the levels seen before the financial crisis. Industry participants suggest that there are a number of factors beyond proposed standards from trade groups that are limiting issuance. The American Securitization Forum started its effort to revive the non-agency mortgage-backed security market in 2009. The first post-crisis jumbo MBS backed by newly originated ...

Originations of adjustable-rate mortgages increased by 9.4 percent in the third quarter of 2016, according to a new ranking and analysis by Inside Nonconforming Markets. With an increase to interest rates on mortgages seen this quarter and even higher rates expected, ARMs appear likely to gain market share. An estimated $58.0 billion in ARMs were originated in the third quarter, accounting for 9.9 percent of first-lien originations, according to Inside Mortgage Finance ... [Includes one data chart]

Lenders originating interest-only mortgages showed divergent trends in the third quarter, with some posting significant declines on a quarterly basis while others continued to increase production. A group of 12 lenders tracked by Inside Nonconforming Markets originated a total of $9.64 billion in IOs during the third quarter, down 23.7 percent from the previous quarter. The decline was driven by PHH Mortgage, whose IO originations through three quarters this year ... [Includes one data chart]

Mortgage brokers played a somewhat diminished role in jumbo mortgage originations during the third quarter, according to an exclusive Inside Nonconforming Markets analysis and jumbo lender profile. Survey data from Inside Mortgage Finance show that brokers were responsible for just 3.9 percent of jumbo originations in the third quarter, down from 4.5 percent in the previous period. The retail (79.8 percent) and correspondent (16.3 percent) shares were ... [Includes one data chart]

Royce Goldman, a marketing lead generator, noted that as interest rates rise, the firm can help connect lenders that originate non-qualified mortgages with borrowers. “As private capital and securitization continue to expand under a more favorable regulatory climate, we will continue to see liquidity expansion but it will require a data driven approach to sourcing the client profile this investor community will lend to,” said John Royce, CEO of Royce Goldman.

FHA reverse mortgage lenders capped the third quarter of 2016 with a 2.2 percent volume increase over the previous quarter, ending the first nine months with $11.0 billion in new Home Equity Conversion Mortgage loans. The year-over-year story, however, was different, as nine-month originations fell 10.5 percent from the same period last year. Purchase HECMs comprised the bulk of originations, 86.3 percent. Unlike in FY 2015, when the Mutual Mortgage Insurance Fund’s healthy HECM portfolio helped pushed the capital reserve ratio above the statutory 2.0 percent requirement, the portfolio appeared to be in bad shape in FY 2016. The fiscal 2016 actuarial audit of the MMIF projected a negative $7.7 billion economic value for the HECM program, dramatically down from last year’s estimated $6.8 billion. Auditors attributed the decline to adverse effects of “incorporating deeper ... [Chart]

While the deal includes many non-QMs and IOs, along with a “tier 3” representation and warranty framework, the senior tranche of the MBS will include credit enhancement of 5.75 percent.

Home-equity lending cooled off in the third quarter of 2016 as consumers took advantage of low interest rates to refinance rather than draw down more second-mortgage debt. Lenders originated an estimated $50.7 billion of home-equity loans during the third quarter, including home-equity lines of credit and closed-end second mortgages. Although that was down 5.2 percent from the second quarter, it still marked the second highest three-month volume since the housing market collapse in 2008. And depository institutions, the dominant lenders in the HEL market, reported...[Includes three data tables]