As interest-only mortgages originated in the run-up to the financial crisis reset, performance has varied depending on the extent of borrowers’ payment shock, according to analysts at Bank of America Merrill Lynch. The analysts noted that delinquencies increase significantly when an IO borrowers’ monthly payment more than doubles, while some borrowers with strong credit or low loan-to-value ratios have been able to refinance or receive a loan modification. IOs include a ...

Mortgage securitization made a small comeback in 2015, but softness in the non-agency MBS sector and higher guaranty fees required by Fannie Mae and Freddie Mac still played a huge influence in the market, according to a new Inside MBS & ABS analysis. An estimated $1.210 trillion of newly-originated home loans were pooled in mortgage securities last year, representing 69.7 percent of the $1.735 trillion in new first-lien originations. That was up slightly from the 67.8 percent back in 2014, which ranked as the lowest securitization rate since 2004, when just 62.6 percent of new originations were securitized. One issue is...[Includes one data table]

JPMorgan Chase is set to issue a $1.89 billion non-agency mortgage-backed security stocked with prime conforming mortgages and jumbo loans. The deal will allow Chase to sell credit risk on some of the mortgages the bank has originated and retained even though the loans were eligible for sale to the government-sponsored enterprises. Chase Mortgage Trust 2016-1 received preliminary AAA ratings from Fitch Ratings and Moody’s Investors Service last week ...

Issuance in the jumbo mortgage-backed securities market has nearly stopped in the first quarter of 2016, but not all issuers are ready to abandon the sector. “The securitization market has been slow to re-open but there’s a lot of optionality to that business to the extent that the banks’ lust for mortgages on their balance sheets changes in different interest rate environments,” said William Roth, CIO of Two Harbors Investment. “The ability for us to grow that business dramatically is there ...

Originating non-qualified mortgages remains a niche market. According to a recent survey of 200 lenders conducted by Lenders One, 64 percent of survey respondents say they originate non-QMs, though only 18 percent of the total respondents frequently originate the loans. Many of the lenders appear to be offering non-QMs to prime borrowers, with nonprime non-QMs much less common. Impac Mortgage Holdings is one of the most prominent lenders offering non-QMs ...

Originations of non-qualified mortgages remain suppressed and industry participants are divided on prospects for volume going forward. “We thought there would be significant non-QM activity by now,” said Chris Haspel, a director at Promontory Financial Group. He was speaking at the recent ABS Vegas conference produced by Information Management Network and the Structured Finance Industry Group. Haspel was a senior adviser for residential mortgage servicing and ...

A proposal this week for how to reform the government-sponsored enterprises included a provision that would allow for an adjustment of the agency share of mortgage financing via loan limits. The loan limit proposal would differ from current practices where the Federal Housing Finance Agency makes increases to the conforming loan limit based on home price trends. The proposal, “A More Promising Road to GSE Reform,” was authored by Jim Parrott, Lewis Ranieri ...

CORRECTION: An update to a story in the March 11 issue of Inside Nonconforming Markets with the headline “Banks’ First-Lien Holdings Increase in 2015” is available at http://www.insidemortgagefinance.com. The story and accompanying ranking were revised because the ranking initially showed numbers from the second quarter of 2015 for the fourth quarter of 2014. Five Oaks Investment said it recently determined ... [Includes five briefs]

In another legacy residential MBS legal action, the California Public Employees’ Retirement System this week reached a record $130 million settlement with Moody’s Investors Service over the ratings service’s allegedly erroneous ratings of AAA-rated structured investment vehicles in the run-up to the financial crisis. Back in 2009, CalPERS sued Moody’s – along with Standard & Poor’s and Fitch Ratings – after the pension fund claimed massive losses from investments in three structured investment vehicles that depended on the liquidity of assets that proved to be illiquid, such as subprime MBS, collateralized debt obligations and other ABS. In the lawsuit, CalPERS accused Moody’s of making “negligent misrepresentations” by assigning its highest credit rating to the investments. This caused significant losses as the market ...

Two Harbors Investment is preparing to issue a jumbo mortgage-backed security that will include loans subject to the TRID integrated disclosure rule. The deal could help resolve the so-called “TRID-lock” seen in the jumbo secondary market as industry participants try to sort out the liability posed by the controversial rule. “TRID has proved to be a very strong headwind,” Diane Wold, a managing director at Two Harbors, said last week at the ABS Vegas conference produced by ...