The Federal Reserve’s relentless acquisition of agency MBS has been the biggest factor in the changing complexion of the MBS investor picture, far outstripping the tortoise-like pace at which the market has expanded this year. The Fed increased its agency MBS holdings by 12.8 percent during the second quarter of 2013, according to a new Inside MBS & ABS profile of investor classes in the mortgage securities market. The central bank added $137.2 billion to its agency MBS holdings during the quarter, and its gross acquisitions totaled $466.6 billion since the beginning of the year. That represented...[Includes two data charts]
Read More
Moody’s Investors Service this week warned of increasing complexity in the structures of new jumbo MBS. However, losses on the deals will only occur in “low probability scenarios” and issuers have yet to bring back all of the non-agency MBS features seen before the financial crisis. Moody’s said complex cash-flow structures in new jumbo MBS can increase risks on senior bonds in the event of high mortgage losses. The features include super-senior support bonds, exchangeable securities, principal-only bonds, and pool interest-only bonds. “These securities pose...
Read More
The loan limit reduction under consideration by the Federal Housing Finance Agency wouldn’t have a major impact on the volume of agency MBS issuance, but industry analysts say prepayment rates on outstanding agency MBS could slow. Mortgages with loan balances greater than $417,000 accounted for 7.9 percent of the $327.76 billion in Fannie Mae and Freddie Mac production in the second quarter of 2013. And mortgages with balances of between $400,000 and $417,000 accounted for a 7.2 percent share, though a significant portion of those originations were in areas with high-cost loan limits and would likely still be eligible for sale to the government-sponsored enterprises. Analysts at Barclays Capital said...
Read More
Investors are eager to get their hands on upcoming risk-sharing deals from Fannie Mae and Freddie Mac even though Freddie’s recent deal was unrated. According to interviews with investors in Freddie’s $500 million Structured Agency Credit Risk bond, 50 different companies bought into the deal with “at least 20 different investors in each tranche,” according to confidential research on the transaction supplied to Inside MBS & ABS. “Word has gotten around...
Read More
Settlement talks between JPMorgan Chase and federal and state negotiators have reportedly focused on a possible $11 billion to resolve a string of investigations into the bank’s mortgage lending and securitization practices. The amount under negotiation has ballooned from JPMorgan’s initial offer of $3 billion to $4 billion, which negotiators rejected. The talks cover federal probes in Philadelphia, Washington and Sacramento. The Department of Justice, Department of Housing and Urban Development and New York Attorney General Eric Schneiderman, who co-chairs a presidential task force investigating bank securitization deals, are involved...
Read More
Top officials in the Federal Reserve System were making the rounds of the financial and economic intelligentsia this week, shedding some light on the central bank’s decision to prolong its support of the financial and housing markets through its admittedly “unconventional means” of massive asset purchases, accommodative monetary policy and explicit forward guidance. “Several questions have emerged following the meeting” of the Federal Open Market Committee, said FOMC member William Dudley, president and chief executive officer of the Federal Reserve Bank of New York, during a speech this week in New York City. “Most noteworthy was – given that market expectations were skewed towards anticipating the beginning of a taper at this meeting – why the committee did not begin to reduce the pace of asset purchases.” Although he was not presuming to speak for the committee, Dudley did provide...
Read More