The number of active issuers of jumbo non-agency MBS effectively doubled this week as presale reports were released on pending deals from JPMorgan Chase and EverBank Financial, bringing more depth and diversification to a market that has slowly regained its footing over the past year.Chase is offering a $616.26 million non-agency jumbo MBS and provided 48.1 percent of the loans to be included in the security. The deal is set to receive AAA ratings from DBRS, Fitch Ratings and Kroll Bond Rating Agency with a 7.40 percent credit enhancement on the top-rated tranche.
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Citadel Loan Servicing Corp. of Irvine, CA, which has raised $200 million from investors to originate nonprime, non-agency residential loans, may try to sell a non-agency MBS in the public market over the next year, according to CEO Dan Perl.When news first broke earlier this month that Citadel had completed its capital raise, the firm said it would likely issue an MBS – but privately. But in a recent interview with Inside MBS & ABS, Perl said “it could wind up being a public deal” though he declined to give much color on the situation.
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It will take about five years for the new common mortgage securitization platform being developed by Fannie Mae and Freddie Mac to become fully functional, according to Edward DeMarco, acting director of the Federal Housing Finance Agency.Testifying before the House Financial Services Committee, DeMarco explained that the plan for a single MBS platform that would be run by a new government entity separate from Fannie and Freddie “does not mean we are consolidating the companies.” The platform would have its own CEO and chairman and office space separate from the two government-sponsored enterprises. It could, in time, be sold to the private sector, he said.
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Nomura recently made a $78.0 million make-whole payment on one of its non-agency MBS deals that was enough to completely pay off the class A notes and reverse substantial realized losses on the class M1 and M2 securities, according to Barclays Capital. Such loan-level repurchases have been uncommon since topping out at about $6.0 billion in payments in 2007.
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Banks and rating services have strong concerns regarding proposed revisions to the Basel securitization framework that would impact capital requirements for securities holdings. They warn that the proposal would discourage banks from participating in the securitization markets.In December, the Basel Committee on Banking Supervision proposed a revised securitization framework it said would make capital requirements more prudent and risk sensitive, mitigate reliance on external credit ratings and reduce the so-called cliff effects in capital requirements. The BCBS proposed two possible hierarchies for assigning capital, enhancements to current ratings-based approaches, and new approaches.
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With several new jumbo MBS deals in the works – from Redwood Trust, JPMorgan Chase and EverBank Financial – it would seem likely that a robust market might develop for the subordinate tranches of these transactions. But so far it’s been a case of plenty of interest in the instrument, but little in the way of available product.
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The Federal Reserve looks like it will stay the course on its asset purchase program for the foreseeable future, but with more flexibility than some on Wall Street were expecting. The Fed’s Open Market Committee this week decided to continue its additional monthly purchases of $40 billion of agency MBS, along with $45 billion in longer-term Treasury securities “until the outlook for the labor market has improved substantially in a context of price stability.”
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A federal judge in Los Angeles last week denied a motion by Bank of America’s Countrywide Financial unit to dismiss securities fraud claims by the Federal Housing Finance Agency on behalf of Fannie Mae and Freddie Mac for toxic MBS purchased by the government-sponsored enterprises.The FHFA’s complaint alleges that Fannie and Freddie purchased approximately $26.6 billion in residential MBS that Countrywide sold from Aug. 30, 2005, to Jan. 23, 2008. The agency alleges negligent misrepresentations and fraud related to the offerings of Countrywide MBS.
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A hefty 84.0 percent of home mortgages originated in 2012 were packaged into MBS, coming up just short of the record 84.4 percent securitization rate set back in 2009, according to a new Inside MBS & ABS analysis. (Includes one data chart)
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