Federal regulators this week issued a final rule regarding appraisals for higher-priced mortgages as required by the Dodd-Frank Act. The rule is the latest in a long line of DFA-related requirements that will have an impact on the non-agency market. The final rule issued this week exempts three classes of higher-priced mortgages from appraisal requirements: certain streamlined refinances, some transactions secured by manufactured homes and transactions of $25,000 or less. Higher-priced mortgages ...

Servicers are complying with most of the requirements under the $25 billion national servicing settlement and the Home Affordable Modification Program. Regulators have warned that penalties will be severe if problems persist. The monitor of the national servicing settlement said in a report last week that CitiMortgage failed one of more than 24 metrics tested in the second quarter of 2013. Joseph Smith, the settlement monitor, said the failure regarding whether loans were delinquent ...

Nationstar Mortgage issued a $158 million non-agency mortgage-backed security this week with prime Alt A mortgages that have seasoned for an average of 11 years, according to a rating report from Standard & Poor’s. The AAA tranche had credit enhancement of 8.60 percent. Mortgages in the MBS had low or no documentation and 43.7 percent were cash-out refinances. S&P said 82.8 percent of the mortgages haven’t been delinquent in the last 24 months and the current ... [Includes one brief]

Originations of non-agency jumbo mortgages in the third quarter increased by 2.7 percent compared with the second quarter of 2013 while total originations fell by 18.6 percent, according to a new ranking by affiliated publication Inside Mortgage Finance. An estimated $77.0 billion in non-agency jumbos were originated in the third quarter, a level of originations not seen since the second quarter of 2007. The jumbo market accounted for 16.7 percent of total mortgage ... [Includes one data chart]

The annual loan limit announcement from the Federal Housing Finance Agency included mixed news for the non-agency market. The FHFA said both the conforming and high-cost loan limits for the government-sponsored enterprises will be unchanged for 2014. However, a reduction to the maximum loan sizes Fannie Mae and Freddie Mac can purchase is still under consideration. “Further information on potential future changes in the maximum size of loans that Fannie Mae and Freddie Mac guarantee will be ...

The jumbo mortgage-backed security market may be thawing slowly. Credit Suisse this week issued its first security since the end of August, and Redwood Trust issued its latest jumbo MBS this month after a similar pause in securitization activity. The $301.90 million deal by Credit Suisse received an AAA rating from DBRS and Standard & Poor’s with credit enhancement of 7.55 percent on the top-rated tranche. Mortgages in CSMC 2013-IVR5 seasoned for an average of four months and had an average interest rate ...

JPMorgan Chase announced two separate settlements recently totaling $17.5 billion regarding non-agency mortgage-backed securities issued before the financial crisis. A $13.0 billion settlement was reached with federal and state entities, while a tentative $4.5 billion settlement was reached with non-agency MBS investors. The Department of Justice said the $13.0 billion settlement involving the Residential MBS Working Group established by President Obama was the largest settlement with a single entity ...

Non-agency lenders that plan to originate qualified mortgages suggest that one of their top concerns is meeting the debt-to-income ratio requirements. Only non-agency mortgages will have to have a back-end DTI ratio of 43 percent or below to be classified as qualified mortgages under the Consumer Financial Protection Bureau rule taking effect Jan 10. Average DTI ratios on mortgages in jumbo mortgage-backed securities are well below that limit – 34.0 percent on the latest deal from Redwood Trust ...

Due diligence can be a more significant factor in the rating of a jumbo mortgage-backed security than the representations and warranties on the deal, according to Kroll Bond Rating Agency. However, major investors in non-agency MBS have expressed concerns about due diligence on new deals along with the adequacy of disclosures. At a structured-finance investor conference hosted by KBRA this month, the rating service noted that it doesn’t adjust expected losses or credit enhancement for variations in ...

Jumbo conduits have made strong progress in controlling for risks from non-retail mortgages, according to Moody’s Investors Service. The rating services tend to view retail originations as the safest channel due to lower risk of fraud. While loans from brokers have traditionally performed worse than loans from other channels, jumbo conduits have implemented a number of measures to reduce fraud risk. “New Penn Financial, for example, contacts borrowers directly with well-scripted calls designed to ...