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Inside Nonconforming Markets

May 9, 2014

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Jumbo MBS Issuance Resumes: Pricing More Attractive but Pessimism Persists

Issuers of jumbo mortgage-backed securities could increase their activity in the second quarter of 2014 after two consecutive quarters of suppressed issuance. Pricing for new jumbo MBS has improved, according to industry participants, though many expect issuance to remain constrained. In April, Redwood Trust issued a $346.30 million jumbo MBS that priced at the end of the first quarter. At the end of April, Credit Suisse issued a $271.73 million jumbo MBS, according to rating reports ... Read More

GSE Loans to Overtake Jumbos at Redwood

In the fourth quarter of 2013, Redwood Trust launched its program to acquire mortgages to be sold to the government-sponsored enterprises. The real estate investment trust’s GSE conduit activity is now poised to overtake the jumbo activity that Redwood has been known for in recent years. Redwood acquired $1.09 billion in residential mortgages in the first quarter of 2014, with jumbos accounting for 72.6 percent of the activity. Officials said the real estate investment trust’s goal is to ... Read More

Plenty of Opportunities Seen in Non-QM Lending

While originating loans that do not meet qualified-mortgage standards does pose litigation risk, many of the lenders willing to offer the loans to prime borrowers have established underwriting standards that minimize the risks while participating in a sector with less competition than the agency market. Mitch Hochberg, general counsel at Ethos Lending and a partner at Fenway Summer, estimated that non-QMs would account for at least 12.5 percent of originations in 2014, assuming a ... Read More

CFPB Considering DTI Cure for Non-Agency QMs

The Consumer Financial Protection Bureau is considering allowing lenders that accidentally trip the debt-to-income ratio threshold for qualified mortgages to cure the mistake and maintain QM status for the loan. The 43 percent DTI ratio standard for QMs currently only applies to non-agency mortgages that aren’t eligible for sale to the government-sponsored enterprises. The limited right to cure DTI mistakes was proposed last week in conjunction with a proposal from the agency to ... Read More

GSE Reform Bill in Flux as Markup Stalls

The Senate Committee on Banking, Housing and Urban Affairs is primed to resume its markup next week of legislation to reform the government-sponsored enterprises. While it remains unlikely that Congress will pass GSE reform legislation this year, industry participants of all sorts are working to change portions of the Senate bill. The markup last week was tabled after brief opening statements from Sens. Tim Johnson, D-SD, and Mike Crapo, R-ID, who are trying to ... Read More

Nonbanks Hungry for Servicing as Transfers Slow

In April, William Erbey, chairman of Ocwen Financial, claimed that servicing sales to nonbanks had essentially stopped due to an investigation launched in February by the New York Department of Financial Services. “Nothing is really being put out for bid right now,” Erbey said during the earnings call for Home Loan Servicing Solutions, where he is also chairman. However, major nonbank servicers expect that the slowdown is temporary, with significant transfers likely to resume ... Read More

SEC’s Reg AB2 Proposal a Non-Agency Non-Starter

Issuers of non-agency mortgage-backed securities warn that the latest disclosure proposal from the Securities and Exchange Commission could completely shut down issuance of non-agency MBS. Since 2010, the SEC has been working on disclosure requirements for MBS and other structured finance products. The regulator was set to approve a final rule in February that would revise asset-level disclosure requirements under Regulation AB but instead re-proposed a portion ... Read More

Bank Holdings of HELs Declines; Originations Up

Holdings of home-equity loans by banks and thrifts continued to decline at the end of 2013, according to a new ranking and analysis by Inside Nonconforming Markets. However, HEL originations are starting to increase as home prices have recovered in recent years. Banks and thrifts held $1.02 trillion in closed-end second liens, home-equity lines of credit and HELOC commitments at the end of the fourth quarter of 2013. The holdings declined by ... [Includes one data chart] Read More

News Briefs

Radian Group announced this week that it plans to acquire Clayton Holdings for $305 million. Among other services, Clayton provides due diligence on non-agency mortgage-backed securities. Radian said the transaction is expected to close this summer and the firm expects to break even on the purchase this year. Radian said Clayton will continue to serve its existing clients, grow in its current operations areas and explore opportunities to market new ... [Includes eight briefs] Read More

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