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Inside MBS & ABS

August 11, 2017

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Mortgage REITs Boost Holdings During 2Q17 and Show Healthy Appetite for Risk-Transfer Deals

Real estate investment trusts that focus on the residential MBS market reported a modest increase in their portfolios during the second quarter of 2017. The 15 mortgage REITs tracked by Inside MBS & ABS held a combined $233.34 billion of residential MBS at the end of June. That was up 1.4 percent from the end of the first quarter, though down 2.9 percent from the midway point in 2016. Ten of the REITs reported...[Includes one data table] Read More

Freddie Picks Up the Pace in Credit-Risk Transfers During 2Q17, Reinsurance Activity a Little Soft

Fannie Mae and Freddie Mac continued to lean heavily on their structured debt programs to meet credit-risk transfer goals originally set by their regulator that have become key features in their business strategies. The two government-sponsored enterprises issued $4.48 billion of credit-risk transfer debt during the second quarter, a modest 5.8 percent increase from the first three months of the year. Overall MBS issuance by the two GSEs was down during that period, but their CRT debt issuances are typically linked to MBS issued six months prior. Fannie’s Connecticut Avenue Securities program produced...[Includes one data table] Read More

New Issuers Poised to Enter Non-Agency MBS Market Bringing Deals Backed by Jumbo Loans and Non-QMs

A number of new issuers appear set to come to market with non-agency MBS backed by newly originated jumbo loans and non-qualified mortgages. Officials at Redwood Trust said they see new issuers emerging, which they said will put pressure on loan prices for aggregators while increasing liquidity in the secondary market. Since the third quarter of 2016, the jumbo MBS arena has been dominated... Read More

Wells Withholding Funds from Vintage Non-Agency MBS Prompts Concerns About the Market for New Loans

The surprise tactic by Wells Fargo to withhold millions of dollars from investors in vintage non-agency MBS spurred Redwood Trust officials to try to protect the reputation of jumbo MBS. “We’re frustrated, not just for us, but for other market participants,” Christopher Abate, Redwood’s president and CFO, said late last week during the real estate investment trust’s earnings call. “For now, we’ll just have to continue updating and educating new-issue investors, and I hope for a quick resolution to this legacy litigation issue.” As of the end of June, Wells Fargo had withheld... Read More

LIBOR is Being Phased Out, Leading to Adjustments In the Mortgage Market. A Big Deal or Ho-Hum?

The clock is ticking on the phrase-out of the London Interbank Offered Rate, or LIBOR, a benchmark the mortgage market has relied on for the past few decades. Now comes the debate: is it something to worry about or no big deal? A new report from Bank of America Merrill Lynch suggests that when it comes to MBS at least, the changes will be felt, depending on the sector. “Certain agency MBS cash flows will be impacted directly,” BAML notes. “For example, underlying cash flows on LIBOR-indexed hybrid ARMs may change if an alternate index is chosen.” The researchers noted... Read More

Direct Issuance Transactions Can Become a Viable Alternative Model for CMBS Deals, Expert Says

In the new world of risk retention and commercial real estate securitization, direct issuance could be a potential financing alternative should third-party risk-retention capital become inadequate to meet demand, according to a CRE debt market expert. Direct issuance and other alternative types of transactions may become increasingly viable in addressing the difficulty of refreshing on an ongoing basis the amount of capital necessary to float the commercial MBS industry, said Rick Jones, a partner with Dechert and co-chair of the firm’s finance and real estate group. Jones cited... Read More

Fraudulent Activity in the Mortgage Market May Be On the Upswing Thanks to Growing Purchase Market

The transition from a market hot with refinances to a more traditional purchase market has made the industry ripe for new and old mortgage fraud schemes, according to CoreLogic. The company’s National Fraud Risk Index reached 133 in the second quarter, a slight uptick from the first quarter, but it represents the highest it’s been since the index was introduced in 2010. That number was 122 in the fourth quarter of last year. With all of the moving parts and players involved in a purchase transaction versus a refinance, CoreLogic said, there are... Read More

Investors Closer to Getting Paid as Agent Announces Plan to Disperse JPMorgan RMBS Bulk Settlement

Investors in certain residential MBS transactions backed by defaulted mortgages in the run-up to the financial crisis are a step closer to being made whole, more than four years after the Securities and Exchange Commission announced a settlement with JPMorgan Securities, Bear Stearns and some affiliates over allegations they misled investors and mishandled bulk settlement proceeds. The case involved is Securities and Exchange Commission v. J. P. Morgan Securities LLC, EMC Mortgage, LLC, Bear Stearns Asset Backed Securities I, LLC, Structured Asset Mortgage Investments II, Inc., SACO I, Inc., and J. P. Morgan Acceptance Corporation I, Case No. 12-CV-1862 (RLW). In November 2012, the SEC filed... Read More

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