Historically low mortgage interest rates generated a huge supply of refinance business during the third quarter of 2012 that drove Fannie Mae and Freddie Mac securitization volumes higher, according to a new ranking and analysis by Inside MBS & ABS. A total of $437.7 billion of single-family MBS were issued during the third quarter, up 15.8 percent from the previous three-month period. It was the biggest production volume for the market since the fourth quarter of 2010, and it lifted year-to-date issuance for the first nine months of the year to $1.207 trillion – a 43.2 percent increase over the same period in 2011. MBS issuance gained...[Includes one data chart]
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New York Attorney General Eric Schneiderman this week sued JPMorgan alleging fraudulent and deceptive acts in the pooling and sale of residential MBS by now-defunct Bear Stearns. Filed in the New York Supreme Court in Manhattan, the lawsuit is the first of several legal actions contemplated by the Residential MBS Working Group, a state-federal task force created by President Obama earlier this year to investigate those suspected of contributing to the financial crisis through the sale of defective mortgage certificates. Bear Stearns, which was taken over by JPMorgan, and co-defendant EMC Mortgage perpetuated...
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Investors in vintage non-agency MBS have seen strong returns in recent months, particularly in August. Industry analysts suggest that returns are likely to remain elevated as there are few remaining risks for non-agency MBS and supply is limited. “Despite increased profit taking on this year’s impressive performance, bonds continue to trade well,” according to analysts at Bank of America Merrill Lynch. “While demand for non-agency bonds will likely grow as home prices recover, it will not be met with more new supply as is seen in the broader high-yield bond universe. This is a very strong backdrop for further price appreciation.” From the beginning of June through the end of September, pricing on the ABX index that tracks subprime MBS has...
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Interest shortfalls on non-agency MBS have increased significantly in the past five months, according to research by Morningstar Credit Ratings. The servicing-related issue causes investors to absorb unpredictable losses and could result in downgrades of non-agency MBS. A sample of 2,858 non-agency MBS deals (21,727 tranches) examined by Morningstar in May and again in August showed a 38.0 percent increase in the number of deals with interest shortfalls. Some 18.6 percent of non-agency MBS deals examined by Morningstar for the August remittance period experienced a shortfall in at least one tranche. Shortfalls increased overall even though 21.8 percent of the shortfalls seen in March had...
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The sale of Ally Financial’s bankrupt mortgage unit, Residential Capital, should not proceed unless or until the company provides more information about the deal, specifically whether preexisting contracts will be honored, according to court filings by Fannie Mae and Freddie Mac. The two government-sponsored enterprises objected to the sale via papers filed this week in U.S. District Bankruptcy Court, New York Southern District. The GSEs expressed concern that without changes to the deal as currently proposed, it may threaten the contracts the GSEs have with ResCap to service loans. “The debtors have failed...
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The MBS market widely embraced the Federal Reserve’s decision to increase its holdings of agency MBS by $40 billion per month until job growth improves significantly, but some observers are questioning the long-term costs and effectiveness of the strategy. Mortgage Bankers Association Chief Economist Jay Brinkman said that the Fed plan is “a way to inject more money into the economy,” while noting that the purchase of the no-risk, lower-yielding assets is designed to force investors to expand their risk appetite. “The idea is that if the Fed steps in and buys up some of these safe-haven assets, that is going to force people to go out and invest more and take on more risk,” he said during an MBA conference in Washington, DC, this week. This approach “is actually turning...
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Private capital remains on the sidelines of the mortgage finance industry, unwilling to gamble on future government policy or the nascent recovery in housing markets, industry experts say. Banks and their examiners are pointing fingers at one another over who is responsible for the current credit crunch because regulations are not all in place, according to Mark Zandi, chief economist at Moody’s Analytics. During a symposium in Washington, DC, this week, Zandi said providers of private capital are also concerned about a housing market that has performed much better in the last six months but still raises doubts about sustaining house price gains. “I don’t think [it can be sustainable] until we nail down...
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The Federal Housing Finance Agency late this week began the formal process of gathering public input on the MBS platform of the future. The agency had previously indicated that it would push...
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