The secondary market for mortgage servicing rights is red hot and shows no signs of slowing, even with the government partially closed.

Seven different issuers generated a relatively strong $3.94 billion in jumbo non-agency MBS during the third quarter, but the sector’s resurgence in 2013 seemed to be losing steam and faces an uncertain future. Jumbo MBS issuance declined 9.1 percent from the second quarter and one transaction – Shellpoint’s second of the year – was pulled back as September came to a close. Redwood Trust managed $1.18 billion in new issuance, a 34.1 percent drop from the second quarter, while the two other jumbo veterans, Credit Suisse and JPMorgan Chase, saw reduced production as well. Industry participants are divided...[Includes three data charts]

Investors at the ABS East conference in Miami this week had a positive outlook for most structured finance investment options, such as vintage non-agency MBS, auto and credit card ABS, collateralized loan obligations and esoteric assets. They were less bullish about new jumbo MBS. More than 3,500 people registered for the conference this year including more than 1,000 investors. Jade Friedensohn, a senior vice president at Information Management Network, the event sponsor, said it was the biggest turnout for ABS East since before the financial crisis. “In the short term things are...

Laurie Goodman, director of the Urban Institute’s housing finance policy center, predicted that the delay in issuance of jumbo MBS will be short.

“Linking of qualified residential mortgages (QRM) in the risk-retention rules to the definition of qualified mortgage (QM) in the CFPB’s ability-to-repay rules will further deepen the divide between QM and non-QM loans in terms of pricing and availability,” said attorney Stephen Kudenholdt of Dentons LLC.

While standardization was the focus of jumbo investors, perhaps the bigger concern for participants is that most investors said they were looking to buy almost anything other than new jumbo MBS.

The auction is being held on the government’s behalf by DebtX. In total, 29,000 nonperforming loans will be offered for sale.

Peters Sack of Credit Suisse said the bank portfolio bid is currently much stronger than the economics for issuing jumbo MBS.

The Supreme Court's decision sends the defendant banks back to federal district court where they will be able to appeal at a later date should an adverse ruling directly affect them.

What if the U.S. government actually defaults on its debt – what would that do to the value of MBS and Treasuries held on the balance sheet of banks? You may not want to know the answer.