Standard & Poor’s announced late last week that it updated the criteria for ratings on non-agency MBS with mortgage collateral originated before 2009. The new standards are effective immediately and will result in significantly more downgrades than upgrades, according to S&P analysts. The standards update criteria for credit, cash flows and rating stability, and introduce new methods for analyzing transactions that have fewer than 100 loans remaining in the pool. Vandana Sharma, a managing director and lead analytic manager for U.S. residential MBS ratings at S&P, said the new standards reflect key market trends. “In light of the stabilization of home prices and delinquencies in the U.S. mortgage market, these criteria seek...

Boosted by its acquisition of Saxon Mortgage Services, Ocwen Financial was the only major servicer to increase its subprime portfolio in the second quarter of 2012. And after three consecutive quarters of improvement, subprime performance deteriorated in the second quarter. An estimated $505.0 billion in subprime mortgages were outstanding as of the end of the second quarter of 2012, according to Inside Nonconforming Markets, down 3.4 percent from the previous quarter as subprime mortgage originations ... [Includes one chart]

Two servicing rules proposed last week by the Consumer Financial Protection Bureau could shift more business to special servicers, according to industry analysts. While senior CFPB officials said that was not the intent of the proposals, special servicers appear to be better equipped than others to handle the complex new requirements. “The inadequate performance of many mortgage servicers has helped widen the misery for many Americans,” said CFPB Director Richard Cordray. He noted that the regulator ...

The interest rate environment is ripe for jumbo borrowers, but industry participants warn that underwriting standards for these loans are at least as stringent as standards for agency loans and much different than five years ago when many jumbo borrowers might have last bought a home or refinanced. “Be prepared to expose everything to examination,” said Bill Reiter, a senior loan officer at PNC Mortgage, speaking at a webinar last week hosted by Realtor Magazine. He noted that income, assets, tax returns and ...

Federal regulators this week proposed requiring a physical inspection of a property’s interior by a qualified appraiser for originations of “higher-risk mortgages,” the latest proxy for subprime loans. The requirement was included in the Dodd-Frank Act and could prompt more than 50,000 new appraisals per year. The Consumer Financial Protection Bureau estimated that full-interior appraisals are conducted as part of current practice in higher-risk mortgage originations on 95.0 percent of purchase-money transactions ...

Chimera Investment announced last week that it needs to restate quarterly earnings and other reports beginning with the third quarter of 2008 due to accounting on its portfolio of non-agency mortgage-backed securities. The real estate investment trust has been grappling with the issue for a year and has not issued earnings since the third quarter of 2011. While still completing an evaluation of the restatement, Chimera said the change will result in lower income along with a more than doubling of ...

Wells Fargo recently determined that it will refinance up to 40,000 borrowers as part of the recent $25.0 billion national servicing settlement. The bank had previously estimated that it would refi 20,000 loans under the settlement, which targets portfolio loans with negative equity. “The expectations ... exceed the amounts that would result from just meeting our minimum commitments under the refinance program due to the significantly higher than expected response we have received from our customers in ...

Home Affordable Modification Program servicers are increasingly offering principal reduction loan modifications to non-agency borrowers, according to the Treasury Department. The increase comes after the Treasury tripled the incentives that can be paid to investors beginning in March, though principal reduction mods have yet to increase significantly due to the change. In recent months, about 70.0 percent of eligible non-agency HAMP borrowers received some form of principal reduction ... [Includes one chart]

It has been another busy week in the turbulent world of litigation over non-agency mortgage-backed securities. The Federal Deposit Insurance Corp. filed lawsuits regarding non-agency MBS, Wells Fargo agreed to settle non-agency MBS-related charges with the Securities and Exchange Commission and the Department of Justice and the SEC dropped its non-agency investigation into actions by Goldman Sachs. The FDIC lawsuits against 15 issuers and underwriters relate to $1.46 billion in AAA tranches of non-agency MBS ...

Standard & Poor’s last week updated its criteria for ratings on non-agency mortgage-backed securities with collateral originated before 2009. The standards update criteria for credit, cash flows and rating stability and apply immediately. The rating service said the changes will result in more downgrades than upgrades. This week, S&P placed 16,872 ratings from 3,364 securities with a par amount of $253.95 billion on CreditWatch. About 70.0 percent of the ratings are on watch for potential downgrades ... [Includes three briefs]