Real estate investment trust Walter Investment Management Corp. announced late last week its closing of a $102 million private placement of non-agency MBS. The purpose of the transaction is to help pay for Green Tree Credit Solutions, which Walter Investment acquired in March for $1.065 billion. Green Tree carries a $37 billion servicing portfolio, mostly for other investors, according to Inside Nonconforming Markets, an affiliated newsletter. The notes were issued by WIMC 2011-1, which is a recently-formed statutory trust sponsored by Walter Investment. “As we near our anticipated early third quarter completion of...

Ocwen’s pending purchase of Litton Loan Servicing’s $42.32 billion portfolio will make Ocwen the largest subprime servicer while also potentially increasing integration problems. Ocwen has faced some issues handling the $24.9 billion HomEq portfolio it acquired last year, and Litton’s business practices are substantially different from Ocwen’s. The combined Ocwen-Litton subprime portfolio is $96.42 billion as of the end of the first quarter of 2011, according to Inside Nonconforming Markets. If the transaction is completed as anticipated later this year, Ocwen will...

Serious delinquency rates on subprime mortgages improved in the first quarter of 2011 for a fifth consecutive quarter. However, analysts warn that the sector faces increased risks due to scrutiny from federal regulators and Congress. Meanwhile, subprime originations remain all but nonexistent, causing the amount of subprime mortgages outstanding to fall to an estimated $605.0 billion in the first quarter of 2011, according to Inside Nonconforming Markets. In 2005, an estimated $625.0 billion in subprime mortgages were originated, with another...[includes one data chart]

The non-agency sector could benefit from an increase in the government-sponsored enterprises’ guarantee fees long before GSE reform is completed. Industry observers suggest that implementation of GSE reform is years away, while an increase in g-fees is much more likely in the near-term. “We may still be waiting for comprehensive GSE legislation a decade from now,” said Steven Abrahams, an analyst at Deutsche Bank Securities. “But regulators in the meantime plan to reshape the GSEs by slowly pricing them out of the market.” The average total guarantee fee charged by...

The Treasury Department withheld payments to Home Affordable Modification servicers for the first time last week. The delay in incentive payments to three major servicers was due to poor handling of non-agency mortgages. Bank of America, JPMorgan Chase Bank and Wells Fargo Bank will not receive HAMP incentive payments until the Treasury determines that the servicers have made improvements. Ocwen Loan Servicing was also determined to be “in need of substantial improvement” but the servicer received a pass because of issues related to...[includes one data chart]

With fears that too few qualified residential mortgages will be originated to support a strong securitization market, the American Securitization Forum proposed that mortgage-backed securities should be allowed to include a blend of QRMs and non-QRMs. MBS issuers also called for loosened underwriting requirements for certain non-QRMs.The proposal was included in the ASF’s comment letter to federal regulators regarding proposed risk-retention rules. Comments were initially due last week but federal regulators recently extended...

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...

Two Harbors Investment plans to issue a $250.0 million jumbo non-agency mortgage-backed security this year, with gradual increases in issuance planned in the coming years, officials at the real estate investment trust said last week. William Roth, a co-chief investment officer at Two Harbors, said there is tremendous opportunity to profit from non-agency MBS issuance – not so much in 2011, but in 2012 through 2014. “Our ability to generate loans to our guidelines and create credit pieces is a runway that could be extremely long,” he said at an investor conference hosted by...

The Federal Reserve’s continued sale of non-agency mortgage-backed securities from the $31.2 billion Maiden Lane II portfolio is decreasing prices on subprime MBS, according to industry analysts. Investors are being urged to buy vintage subprime MBS now as prices on the assets appear to be hitting bottom. Prices on subprime MBS have dropped by as much as 21.0 percent since mid-February, according to the ABX index. The bulk of the decline has occurred since early April, largely for 2006 and 2007 vintages. “There are some reasons to believe we are at or approaching the...

Wells Fargo, the biggest originator of Home Equity Conversion Mortgage loans, is exiting the reverse mortgage market after 20 years due to the unpredictability of property values. The departure of the San Francisco-based lender is another major blow to the wobbly HECM market already weakened by plummeting home prices. In February, Bank of America, the second largest HECM producer, announced it was quitting the reverse mortgage market to focus on other lines of business. The two institutions showed a combined ... [includes one data chart and one graph]