While issuance of jumbo mortgage-backed securities is the strongest it’s been in the aftermath of the financial crisis, industry analysts suggest that it will be years before activity in the non-agency MBS market returns to levels anywhere near what was seen before the financial crisis. “The short-term outlook remains dismal,” said Quincy Tang, a managing director and head of U.S. residential MBS at DBRS. The factors that have limited issuance ...

Originations of adjustable-rate mortgages declined in the first quarter of 2015 as interest rate trends continued to incentivize many borrowers to select fixed-rate mortgages. Some $41.0 billion in ARMs were originated in the first three months of 2015, according to estimates by Inside Nonconforming Markets, down 10.9 percent from the previous quarter and down 6.8 percent from the first quarter of 2014. Many of the mortgages are ... [Includes one data chart]

Lenders offering nonprime loans that do not meet the qualified-mortgage standard have run into difficulties generating volume because weak secondary-market demand has made pricing on the loans unattractive to borrowers. Jeff Lemieux, until recently a vice president at Bayview Asset Management, said volume in nonprime non-QMs is extremely weak across the industry. “The consumer is resistant to the pricing,” he said. Lemieux said credit-impaired borrowers feel that ...

DBRS and Standard & Poor’s separately issued revised criteria for rating non-agency mortgage-backed securities in recent weeks. DBRS will give slightly more credit to jumbo MBS due to strong performance in recent years, while S&P adjusted modeling relating to home price trends. DBRS noted that from 2010 through the end of April, $32.1 billion in jumbo MBS had been issued, with only one deal taking any losses to date, a 0.04 percent loss. “Positive loan attributes ...

A final rule issued by the Securities and Exchange Commission regarding third-party due diligence providers and rating services takes effect on June 15. The rule is set to prompt a number of changes in the non-agency mortgage-backed security market, largely targeting transparency. For MBS that receive ratings, public disclosure of results from third-party due diligence reviews will be required before a deal is priced. The disclosure requirement even applies to deals issued as private placements, which is the current practice for jumbo MBS ...

Ocwen Financial’s servicing of certain mortgages in non-agency mortgage-backed securities remains at risk due to a downgrade watch issued last week by Standard & Poor’s. Officials at Ocwen said they were surprised by the announcement while noting that Moody’s Investors Service upgraded various ratings relating to the nonbank. S&P said it placed servicer ratings for Ocwen on watch for downgrade last week due to regulatory scrutiny of the company, results from ...

Underwriting standards on jumbo mortgages tightened slightly in May compared with the previous month, according to the Mortgage Bankers Association. The results reversed six consecutive months of looser jumbo underwriting. Two-thirds of the 182 banks recently surveyed by the American Bankers Association said their originations in 2014 included non-qualified mortgages. Non-QMs accounted for 10 percent of the banks’ originations ... [Incluides three briefs]

Originations of jumbo mortgages continued strong in the first quarter of 2015, according to a new ranking and analysis by Inside Nonconforming Markets. An estimated $70.0 billion in jumbos was originated during the quarter, up 59.1 percent compared with the first quarter of 2014. A number of jumbo lenders more than doubled their production during that time. “Our jumbo pipelines are near record high, as the demand for jumbo mortgages remains healthy,” said ... [Includes one data chart]

Real estate investment trusts and new investors in the mortgage business could provide funding for nonconforming lending, but securitization remains challenged, according to various experts at the recent secondary market conference sponsored by the Mortgage Bankers Association. The non-agency mortgage-backed securities market is very subdued, said Laurie Goodman, director of the Housing Finance Policy Center at the Urban Institute. Issuance has been running at about ...

The strong performance of jumbo mortgages originated in recent years is due to more than just focusing on borrowers with healthy credit scores, loan-to-value ratios and debt-to-income ratios, according to Moody’s Investors Service. The analysts said “soft” qualitative underwriting factors play a major role in jumbo performance. Qualitative factors considered by jumbo lenders include the absence of negative events in a borrower’s credit history, the number of unblemished lines of credit and ...