An official at the Office of the Comptroller of the Currency warned that non-agency jumbos with interest rates lower than comparable agency mortgages are a sign that banks are chasing yield. Darrin Benhart, deputy comptroller for credit and market risk, said banks are taking on more interest rate risk and credit risk to maximize returns. “We are beginning to see signs of the classic cyclicality in banking where traditional lagging indicators are improving so bankers start to layer risk back into ...

Higher-priced mortgages accounted for 3.0 percent of the number of mortgages originated in 2012, according to a Federal Reserve analysis of Home Mortgage Disclosure Act Data released this week. The loans had a 3.7 percent share of HMDA originations last year and a 26.0 percent share in 2006. The Consumer Financial Protection Bureau last week finalized a number of tweaks to pending mortgage rules. Adjustments were made to the servicing rule, loan originator compensation rule, definitions for ... [Includes three briefs]

The U.S. Justice Department has subpoenaed documents from Clayton Holdings LLC, once Wall Street’s largest mortgage due-diligence firm, as investigators eye-ball the due diligence that was performed on residential MBS deals in the run-up to the financial crisis. According to Bloomberg, the Justice Department presented a subpoena to Clayton on July 1, requesting an extensive amount of documentation having to do with the firm’s work on such deals. The DoJ is apparently seeking internal communications related to a review of pools of loans, due-diligence reviews performed by Clayton, as well as all communication between the clients for whom the company performed such reviews and the employees with which they dealt. The subpoena is...

Stewart Information Services, which has made a name for itself in the title insurance space, has purchased most of the assets of Allonhill, LLC, a due-diligence firm that conducts reviews on non-agency loans feeding jumbo MBS. No purchase price was disclosed on the sale. As Inside MBS & ABS went to press, both companies were saying little about the sale outside of a short press release. Due-diligence sources familiar with the deal say...

The revised risk-retention rule proposed last week by federal regulators includes provisions that are looser than current practices in the non-agency jumbo mortgage-backed security market and some that are more stringent. Regulators also acknowledge that the proposed rule maintains incentives for lenders to focus on originations of agency mortgages. The regulators now favor aligning the definition of qualified residential mortgages under the risk-retention rule with the qualified mortgage standard ...

With backing from President Obama, the Federal Housing Finance Agency is considering lowering Fannie Mae and Freddie Mac loan limits in 2014. Industry participants have used the potential change to call on the Consumer Financial Protection Bureau to alter requirements for qualified mortgages. “Assuming the loan limits are lowered, the problem of excluding too many loans from QM coverage could be addressed, at least temporarily, by modifying the ability-to-repay rule,” Pete Mills, a ...

Richard Johns, executive director of the Structured Finance Industry Group, said the SFIG is apprehensive about the overall effect the ability-to-repay rule and qualified mortgage provisions will have on jumbo mortgage lending. The SFIG recently met with the Consumer Financial Protection Bureau to discuss the issues. In a follow-up letter sent in August, the SFIG said its primary concerns are the effect the debt-to-income ratio requirement for QMs will have on borrower access to jumbos; the ...

Banks have been retaining recent originations of jumbo mortgages in portfolio while selling vintage mortgage servicing rights to nonbanks or entering into subservicing agreements. And with the rise in interest rates, banks have increased their appetite for adjustable-rate mortgages. Banks held $1.76 trillion in first liens in portfolio as of the end of the second quarter of 2013, down only 0.1 percent from the second quarter of last year, according to a new ranking and analysis ... [Includes one data chart]

Appetite for jumbo mortgages among big banks has limited issuance of non-agency jumbo mortgage-backed securities in recent months. And analysts suggest that the next increase in the guaranty fees charged by the government-sponsored enterprises could shift even more production to bank portfolios instead of into non-agency MBS. Certain big banks continue to offer interest rates on jumbos that are below rates on comparable mortgages with conforming balances. For a 30-year fixed-rate non-agency jumbo with ...

Redwood Trust issued its latest non-agency jumbo mortgage-backed security last week, two days after presale reports on the deal were published. It was a quick turnaround for the real estate investment trust, as jumbo MBS investors have generally had at least a week to mull investing in deals before they close. The mortgages in the $346.32 million Sequoia Mortgage Trust 2013-11 also had an exceptionally young weighted-average loan age of 0.5 months, according to Kroll Bond Rating Agency ...