In a few months, mortgage insurance giant Radian Group will close on its $305 million cash purchase of Clayton Holdings, ending the “independent” status of one of the nation’s largest MBS due-diligence firms. Almost all the larger due-diligence companies have been gobbled up by larger players over the past 18 months. Most of the acquirers have other interests in the residential finance industry and are betting on the eventual return of the non-agency MBS market. That could be...

Now that the mortgage lending industry has a few months of experience dealing with the qualified mortgage standard under the CFPB’s ability-to-repay rule, some lenders are getting more confident about lending outside the parameters of the QM. Last week, during a webinar sponsored by Inside Mortgage Finance, an affiliated newsletter, industry experts highlighted some key considerations as to how to do so while minimizing the legal risk and otherwise overcoming certain compliance challenges. “A couple of points that I would make is that you want to document every step along the way – because what you’re really managing to is not necessarily the CFPB, not even necessarily a judge. You’re probably managing to the lawyer who is looking to take the...

Bayview Asset Management announced late last week that it will delay the issuance of a non-agency MBS backed by re-performing subprime mortgages with an unpaid principal balance of $215 million. The delay was prompted by concerns about property valuations and loss severity. Standard & Poor’s issued a presale report on Bayview Opportunity Master Fund Trust 2014-9RPL on April 28, and the deal was scheduled to close May 12. The MBS was set to receive a AAA rating from S&P, but the rating service said it withdrew its preliminary rating due to Bayview’s extension of the planned closing date. The delay in closing was prompted...

The sphere of mortgage lending that will exist outside the parameters of the qualified-mortgage standard established by the Consumer Financial Protection Bureau represents an attractive opportunity for both lenders and bond buyers, but skittish investors need to be won back before they return and participate to any significant degree. That was one of the key take-aways from a webinar sponsored this week by Inside Mortgage Finance, an affiliated publication. Non-QM mortgages will exist...

Issuers of jumbo mortgage-backed securities could increase their activity in the second quarter of 2014 after two consecutive quarters of suppressed issuance. Pricing for new jumbo MBS has improved, according to industry participants, though many expect issuance to remain constrained. In April, Redwood Trust issued a $346.30 million jumbo MBS that priced at the end of the first quarter. At the end of April, Credit Suisse issued a $271.73 million jumbo MBS, according to rating reports ...

In the fourth quarter of 2013, Redwood Trust launched its program to acquire mortgages to be sold to the government-sponsored enterprises. The real estate investment trust’s GSE conduit activity is now poised to overtake the jumbo activity that Redwood has been known for in recent years. Redwood acquired $1.09 billion in residential mortgages in the first quarter of 2014, with jumbos accounting for 72.6 percent of the activity. Officials said the real estate investment trust’s goal is to ...

While originating loans that do not meet qualified-mortgage standards does pose litigation risk, many of the lenders willing to offer the loans to prime borrowers have established underwriting standards that minimize the risks while participating in a sector with less competition than the agency market. Mitch Hochberg, general counsel at Ethos Lending and a partner at Fenway Summer, estimated that non-QMs would account for at least 12.5 percent of originations in 2014, assuming a ...

The Consumer Financial Protection Bureau is considering allowing lenders that accidentally trip the debt-to-income ratio threshold for qualified mortgages to cure the mistake and maintain QM status for the loan. The 43 percent DTI ratio standard for QMs currently only applies to non-agency mortgages that aren’t eligible for sale to the government-sponsored enterprises. The limited right to cure DTI mistakes was proposed last week in conjunction with a proposal from the agency to ...

The Senate Committee on Banking, Housing and Urban Affairs is primed to resume its markup next week of legislation to reform the government-sponsored enterprises. While it remains unlikely that Congress will pass GSE reform legislation this year, industry participants of all sorts are working to change portions of the Senate bill. The markup last week was tabled after brief opening statements from Sens. Tim Johnson, D-SD, and Mike Crapo, R-ID, who are trying to ...

Issuers of non-agency mortgage-backed securities warn that the latest disclosure proposal from the Securities and Exchange Commission could completely shut down issuance of non-agency MBS. Since 2010, the SEC has been working on disclosure requirements for MBS and other structured finance products. The regulator was set to approve a final rule in February that would revise asset-level disclosure requirements under Regulation AB but instead re-proposed a portion ...