Tag Archives: RMBS

Morningstar, Inc., a provider of independent investment research, announced Monday that its Realpoint unit has launched an operational risk assessment practice to evaluate the performance of mortgage servicing firms. Morningstar says the new practice, which is part of Realpoint's credit ratings business, will complement the company's convention of providing transparency and insight to investors in mortgage-backed securities.

On Monday the Treasury announced that it will wind down the remaining $142 billion mortgage-backed securities (MBS) portfolio it carries. This news comes just as the federal government is making plans to drastically reduce its role in the mortgage marketplace. Beginning this month, Treasury plans to sell up to $10 billion in agency-guaranteed MBS each month, with the goal of fully extinguishing the portfolio in a little over a year and turning a profit for taxpayers.

The Securities and Exchange Commission (SEC) has charged three former executives at IndyMac Bancorp with securities fraud for misleading investors about the lender's failing financial condition. The executives, former CEO Michael Perry and former CFOs A. Scott Keys and S. Blair Abernathy, allegedly filed false and misleading disclosures about the financial stability of IndyMac and IndyMac Bank F.S.B. and continued to sell millions of dollars in new stock. Abernathy is the only one of the three who has reached a settlement with the SEC.

Organizations from every corner of the industry are weighing in on the administration's proposal to reform the nation's housing finance system. A number of groups are throwing their support behind the long-term reform option that calls for a group of private companies to provide guarantees for well underwritten mortgage securities, and the federal government to offer investors a type of reinsurance on these bonds. There are some, though, who say even this more prudent approach will raise borrowing costs and push small businesses out of the market.

On top of the more imminent reform measures laid out Friday to begin winding down Fannie Mae and Freddie Mac, the Obama administration's proposal outlines three options for long-term reform and structuring the government's future role in housing. One approach would pull the government completely out of the mortgage guarantee business except for insurance provided through FHA. A second option would add a backstop mechanism during times of crisis to the mix. And a third option would provide an FDIC-type insurance guarantee for certain mortgage securities.

DecisionReady, a provider of default servicing compliance solutions based in California, announced this week that it has reviewed 1 million delinquent residential mortgage loans for loss mitigation and foreclosure process and policy compliance for leading servicers. DecisionReady technology offers compliance for early stage delinquency through loss mitigation, foreclosure, and the post-sale process to ensure regulatory rules and investor guidelines are met.

Moody's Investors Service studied two million loans backing residential mortgage-backed securities (RMBS) pools and found that a loan that is modified and then reported as current is three times as likely to default over the ensuing twelve months as a current loan that has not been modified. The agency's also put the practices of eight major servicers under the microscope. It found that six-month re-default rates vary considerably, from 20 percent for Citi and Litton to 33 percent for Bank of America.

Moody's Investors Service has outlined several credit concerns that have led the agency to decline to give its highest ratings to resecuritizations of U.S. residential mortgage-backed securities (RMBS). Moody's says such denials are becoming more and more common. Among the agency's primary concerns are ambiguities in legal documents and uncertainties resulting from foreclosure irregularities.

Income and expense data released by the Federal Reserve this week shows the central bank is earning a pretty penny from its investments in mortgage securities. The Fed began buying mortgage bonds from Fannie Mae, Freddie Mac, and Ginnie Mae in November of 2008 to help prop up the nation's deteriorating mortgage markets. In 2009, Fed officials reported that these efforts, combined with its purchases of Treasury securities, yielded a $46.1 billion profit. In 2010, earnings on those investments jumped to $76.2 billion.

As the backlog of foreclosures continues to drive down housing prices, losses on private-label residential mortgage backed securities (RMBS) will increase in 2011, according to Moody's. The forecast for more red ink seeping from home loans sold to investors comes despite the fact that the agency believes the rate at which loans become delinquent will decline during the year. Moody's expects flaws in foreclosure practices that have recently come to light to delay foreclosures by three to six months, further extending the window of losses for investors.