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Inside Nonconforming Markets

February 6, 2015

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Treasury Bid to Revive Non-Agency MBS Starts With Ratings on Freddie Loans

If issuers were to include agency-eligible mortgages with slightly less than pristine underwriting standards in new non-agency mortgage-backed securities, the deals could receive ratings with credit enhancement levels similar to the levels on recent jumbo MBS, according to the results of an exercise released this week by the Treasury Department. Treasury asked six rating services to assign ratings to hypothetical non-agency MBS comprised of $19.75 billion of mortgages ... Read More

Chase Issues Largest Post-Crisis Jumbo MBS

JPMorgan Chase this week issued the largest jumbo mortgage-backed security seen since the market started to return in 2010. The $940.06 million deal was backed by adjustable-rate mortgages originated by First Republic Bank. Previously, the largest post-crash deal was a $666.13 million jumbo MBS from Redwood Trust in February 2013. Prior to the financial crisis, many non-agency MBS had balances that topped $1.0 billion, while most jumbo MBS ... Read More

First Republic Tops Jumbo MBS Contributors

First Republic Bank was the top contributor to jumbo MBS issued in 2014, according to a new ranking and analysis by Inside Nonconforming Markets. Officials at First Republic note that the bank tends to sell its originations of fixed-rate mortgages while adjustable-rate mortgages make for better portfolio holdings. However, the secondary market bid was strong enough for First Republic to sell some jumbo ARMs during the year, including a ... [Includes one data chart] Read More

Two Harbors Sees Growth in Jumbo MBS

Two Harbors Investment is using Federal Home Loan Bank advances to significantly increase its activity in the jumbo market. The real estate investment trust issued three jumbo MBS in 2014 totaling $1.0 billion. Officials revealed this week that Two Harbors’ jumbo conduit origination activities have a current average run rate of $300 million per month. “That’s putting us on track to have substantially more volume and complete more securitizations this year ... Read More

Outlook for Action on GSEs Murky at Best

Policymakers continue to provide plenty of doubt about whether anything will happen to shrink the footprint of the government-sponsored enterprises. At a hearing last week before the House Financial Services Committee, Mel Watt, director of the Federal Housing Finance Agency, said he hasn’t made a decision about future adjustments to the guaranty fees charged by Fannie Mae and Freddie Mac. The g-fee issue has been under review by the FHFA for ... Read More

Lenders’ Skepticism About Non-QMs Remains

One year after the Consumer Financial Protection Bureau’s standards for qualified mortgages took effect, lenders remain cautious about originating non-QMs. “Even though DBRS has seen a few lenders implementing non-QM programs that allow for back-end debt-to-income ratios as high as 50 percent and FICO scores as low as 600, DBRS expects that larger lenders, who are still recovering from the massive fines they had to pay for making subprime loans, will ... Read More

CFPB Proposes Help for Small Portfolio Lenders

A larger share of small portfolio lenders would qualify for exemptions from standards for qualified mortgages under a proposal issued last week by the Consumer Financial Protection Bureau. Among other issues, the CFPB proposed expanding the definition of “small creditor” from the current limit of 500 first-lien mortgages originated in a year to 2,000 mortgages. The new definition would exclude loans held in portfolio by the lender and its affiliates ... Read More

Ocwen Faces Non-Agency Servicing Issues

Regulators, rating services and investors are all targeting Ocwen Financial’s servicing of mortgages in non-agency mortgage-backed securities. Company officials responded by acknowledging some of the issues while strongly pushing back on others. Fitch Ratings and Moody’s Investors Service both recently downgraded Ocwen’s servicer ratings. When a servicer’s ratings fall below a certain level, non-agency MBS investors sometimes have the option to ... Read More

News Briefs

After loosening every month for more than a year, underwriting on jumbo mortgages started to tighten in mid-2014, according to new data from the Mortgage Bankers Association and AllRegs. In the past three months, jumbo underwriting has started to loosen again and standards are the loosest they have been since early 2011.Angel Oak Mortgage Solutions announced that it launched a mini-correspondent offering for non-agency nonprime ... [Includes three briefs] Read More

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