Posts Tagged ‘ residential mortgage-backed securities (RMBS) ’

JPMorgan Chase Reaches $13B RMBS Settlement with U.S. Government

JPMorgan Chase Reaches $13B RMBS Settlement with U.S. Government

BY: CARRIE BAY

JPMorgan Chase has struck a deal with the U.S. Department of Justice to resolve civil claims from both federal and state officials over residential mortgage-backed securities (RMBS) issued prior to January 1, 2009, by the bank and two financial institutions it acquired in 2008–-Bear Stearns and Washington Mutual.

The $13 billion settlement is the largest in American history between the U.S. government and a single entity.

Under the agreement reached, JPMorgan will pay $9 billion in restitution and provide an additional $4 billion in relief for homeowners at risk of foreclosure and communities impacted by the housing crisis. Federal officials say the relief funding could benefit more than 100,000 borrowers.

According to JPMorgan, the cash portion of the settlement payment consists of a $2 billion civil monetary penalty and $7 billion in compensatory payments, including a previously announced $4 billion payment to resolve litigation claims from the Federal Housing Finance Agency.

Borrower relief will be in the form of principal reduction, forbearance, and other direct benefits from various relief programs, the bank explained. JPMorgan Chase has committed to complete delivery of the promised relief to borrowers before the end of 2017.

The settlement was negotiated through the Residential Mortgage-Backed Securities Working Group, a joint state and federal unit formed in 2012 by President Obama to investigate wrongdoing within the mortgage-backed securities market that helped to trigger, contribute to, or exacerbate the U.S. financial crisis.

New York Attorney General Eric T. Schneiderman co-chairs the RMBS Working Group. Tuesday’s settlement comes 13 months after Schneiderman sued JPMorgan for fraudulent RMBS packaged and sold by Bear Stearns before it was acquired by JPMorgan at the behest of government officials at the Federal Reserve, FDIC, and U.S. Treasury.

In announcing the unprecedented settlement, Schneiderman said, “Since my first day in office, I have insisted that there must be accountability for the misconduct that led to the crash of the housing market and the collapse of the American economy. This historic deal … is exactly what our working group was created to do.”

He continued, “We refused to allow systemic frauds that harmed so many New York homeowners and investors to simply be forgotten, and as a result we’ve won a major victory today in the fight to hold those who caused the financial crisis accountable.”

Separately, the FDIC announced Tuesday that it also reached a settlement with JPMorgan Chase and its affiliates in relation to the failure of six banks. The FDIC, acting as receiver for the failed institutions, says misrepresentations where made in the offering documents for 40 RMBS purchased by the now-defunct banks.

JPMorgan agreed to pay $515.4 million, which will be distributed among the receiverships for the failed Citizens National Bank (failed May 22, 2009), Strategic Capital Bank (May 22, 2009), Colonial Bank (August 14, 2009), Guaranty Bank (August 21, 2009), Irwin Union Bank and Trust Company (September 18, 2009), and United Western Bank (January 21, 2011).

From May 2012 to September 2012, the FDIC as receiver for five of the failed banks filed 10 lawsuits against JPMorgan, its affiliates, and other defendants for violations of federal and state securities laws in connection with the sale of RMBS.

As part of the global settlement reached, JPMorgan acknowledged it made serious, material misrepresentations to the public—including the investing public—about numerous RMBS transactions, according to a statement on the New York attorney general’s website.

JPMorgan Chase says it is fully reserved for this settlement.

JPMorgan Strikes Deal with Mortgage Investors

JPMorgan Strikes Deal with Mortgage Investors

11/18/2013 BY: CARRIE BAY

JPMorgan Chase & Co. has reached a $4.5 billion agreement with 21 institutional investors to settle mortgage repurchase and servicing claims on 330 residential mortgage-backed securities (RMBS).

JPMorgan will make a binding offer to the trustees of theRMBS trusts issued by J.P. Morgan, Bear Stearns, and Chase. The group of investors support the arrangement, according to the Houston-based law firm representing the group, Gibbs & Bruns LLP, and have asked the trustees to accept JPMorgan’s offer.

JPMorgan called the settlement “another important step” in its efforts to resolve legacy RMBS matters and said it believes it is “appropriately reserved for this and any remaining RMBS litigation matters.”

Long Liquidation Times Ramp Up Loss Severities Despite Rising Prices

Long Liquidation Times Ramp Up Loss Severities Despite Rising Prices

11/12/2013 BY: KRISTA FRANKS BROCK

While home prices have risen 14 percent nationally since their trough a few years ago, Fitch Ratings points out in a recent report that loss severities on residential mortgage-backed securities (RMBS) have improved only “modestly.”

Loss severities improved just 5 percent over the past year, according to Fitch’s report, titled “U.S. RMBS: Why Aren’t Loss Severities Improving Faster?” The primary reason for the slow improvement, the ratings agency concluded, is prolonged liquidation timelines, which “reached an all-time high in third-quarter 2013 and increased at a faster rate in 2013 than in any prior year.”

In fact, 32 percent of seriously delinquent homeowners have not made a payment on their mortgage in more than four years. This is up drastically from 7 percent at the start of last year, according to Fitch. About 40 percent of the mortgages that have been seriously delinquent for the past four years are legacy Countrywide loans now serviced by Bank of America, Fitch says.

The average liquidation timeline is 32 months, as of the third quarter of this year, the ratings agency’s study showed. Fitch says this is twice as long as the 2008 average.

Several events have led to increasing liquidation timelines over the past few years. Fitch names the introduction of the Home Affordable Modification Program (HAMP) and the investigation and national foreclosure lawsuit that led many servicers to halt their foreclosure processes as two major contributors.

Amid this environment, the rate of seriously delinquent loans transitioning into foreclosure reached an all-time low, according to Fitch’s records. Meanwhile, loan modification rates approached an all-time high.

While timelines are raising loss severities, short sales, which have risen from 20 percent of liquidations in 2009 to 60 percent currently, are lowering loss severities.

In fact, short sales on homes with subprime loans incur loss severities about 20 percent lower than loss severities incurred on REO sales, according to Fitch.

For now, Fitch does not expect any declines in loss severities, but moving forward, the agency expects lower loss severities on currently performing loans that fall delinquent.

“Lower mark-to-market loan to values, greater amortization, and improved timelines due to more manageable numbers of distressed properties should lead to meaningfully lower severities for loans that liquidate two to three years in the future,” Fitch said.

“On average, performing loans have stronger credit characteristics, including lower current loan-to-value ratios and shorter remaining terms,” Fitch added.

Long Liquidation Times Ramp Up Loss Severities Despite Rising Prices

Long Liquidation Times Ramp Up Loss Severities Despite Rising Prices

11/12/2013 BY: KRISTA FRANKS BROCK

While home prices have risen 14 percent nationally since their trough a few years ago, Fitch Ratings points out in a recent report that loss severities on residential mortgage-backed securities (RMBS) have improved only “modestly.”

Loss severities improved just 5 percent over the past year, according to Fitch’s report, titled “U.S. RMBS: Why Aren’t Loss Severities Improving Faster?” The primary reason for the slow improvement, the ratings agency concluded, is prolonged liquidation timelines, which “reached an all-time high in third-quarter 2013 and increased at a faster rate in 2013 than in any prior year.”

In fact, 32 percent of seriously delinquent homeowners have not made a payment on their mortgage in more than four years. This is up drastically from 7 percent at the start of last year, according to Fitch. About 40 percent of the mortgages that have been seriously delinquent for the past four years are legacy Countrywide loans now serviced by Bank of America, Fitch says.

The average liquidation timeline is 32 months, as of the third quarter of this year, the ratings agency’s study showed. Fitch says this is twice as long as the 2008 average.

Several events have led to increasing liquidation timelines over the past few years. Fitch names the introduction of the Home Affordable Modification Program (HAMP) and the investigation and national foreclosure lawsuit that led many servicers to halt their foreclosure processes as two major contributors.

Amid this environment, the rate of seriously delinquent loans transitioning into foreclosure reached an all-time low, according to Fitch’s records. Meanwhile, loan modification rates approached an all-time high.

While timelines are raising loss severities, short sales, which have risen from 20 percent of liquidations in 2009 to 60 percent currently, are lowering loss severities.

In fact, short sales on homes with subprime loans incur loss severities about 20 percent lower than loss severities incurred on REO sales, according to Fitch.

For now, Fitch does not expect any declines in loss severities, but moving forward, the agency expects lower loss severities on currently performing loans that fall delinquent.

“Lower mark-to-market loan to values, greater amortization, and improved timelines due to more manageable numbers of distressed properties should lead to meaningfully lower severities for loans that liquidate two to three years in the future,” Fitch said.

“On average, performing loans have stronger credit characteristics, including lower current loan-to-value ratios and shorter remaining terms,” Fitch added.

SEC, Justice Department Sue BofA Over $855M RMBS Offering

SEC, Justice Department Sue BofA Over $855M RMBS Offering

08/07/2013 BY: ESTHER CHO

The Securities and Exchange Commission (SEC) and Justice Department filed separate complaints against Bank of America and certain subsidiaries for allegedly misrepresenting an $855 million offering of residential mortgage-backed securities (RMBS), according to statements Tuesday.

The SEC’s complaint filed in U.S. District Court for the Western District of North Carolina stated the offering, known as BOAMS 2008-A, was sold as “prime” securitization. However, more than 70 percent of the offering originated through the bank’s wholesale channel of third-party mortgage brokers. Even though the wholesale channel loans carried greater risk, the bank did not disclose information regarding the associated risks to investors, according to the complaints.

In addition, more than 40 percent of the 1,191 mortgages in the offering did not conform to the bank’s own guidelines, according the Justice Department’s statement. The complaints allege that as a result of the misrepresentations, investor losses are expected to exceed $100 million.

In a statement, a BofA spokesperson told The New York Times, “These were prime mortgages sold to sophisticated investors who had ample access to the underlying data and we will demonstrate that.”

New Delinquency Roll Rates Continue to Improve

New Delinquency Roll Rates Continue to Improve

07/22/2013 BY: ESTHER CHO

The rate of performing borrowers who rolled into delinquency status decreased in the second quarter, Fitch Ratings reported Monday.

New delinquency roll rates showed stronger performance across all categories (subprime, Alta-A, and prime), with non-agency roll rates hitting their lowest level since early 2007.

Overall, Fitch’s delinquency roll rate index fell to 2 percent in the second quarter of this year, down from 2.4 percent in the previous quarter and down from 2.2 percent a year ago.

Fitch credited the improvement to borrowers receiving tax refunds, among other factors.

“The improved roll rates are driven most notably by home price increases, steady job growth and positive selection among borrowers remaining in the mortgage pools,” said Sean Nelson, director at Fitch.

“One area of concern remains prime mortgage loans originated before 2005, which continue to struggle due to concentrations of adversely selected borrowers,” he added.

Fitch expects the improvements to continue, noting new delinquency roll rates have improved year-over-year since 2010.

Additionally, Fitch reported outstanding loans more than 60 days or more past due improved across all sectors in the residential mortgage backed securities (RMBS) space. Although Fitch noted concerns for pre-2005 vintages, the prime delinquency rate for 2010 loans are at or near zero, while 2005 to 2007 vintages are improving.

Fitch also found foreclosure liquidation timelines have lengthened as short sales are used less frequently to handle non-performing loans.

According to the report, short sales liquidation timelines tend to be about 12 months shorter than REO timelines. While short sales were still the most commonly used tool for non-performing loans, accounting for over half of all resolution, Fitch noted the as a percentage of all resolutions, short sales actually decreased in the second quarter.

The extension in liquidation timelines is also a reflection of “increased procedural challenges servicers face due to regulatory changes,” as well as “some adverse selection of properties not resolved through short sales,” the report found.

CoreLogic Offers New RMBS Bond Assessment Service

CoreLogic Offers New RMBS Bond Assessment Service

01/25/2013 BY: ESTHER CHO

CoreLogic announced the CoreLogic Bond Tracker is now available.

CoreLogic describes the tracker as a bond assessment service for non-agency residential mortgage-backed securities (RMBS) that offers granular, dynamic, and automated analyses of security holdings and underlying collateral.

CoreLogic’s bond tracker provides life-of-bond surveillance and can also aid in assessing the credit risk of mortgage securities. The tracker considers risk factors such as changes in property value and other events that impact the market.

“Today, investors are looking for greater transparency into the quality and risks of the collateral backing non-agency bonds, and issuers are looking for new ways to rebuild investor confidence. We believe CoreLogic Bond Tracker will appeal to both groups,” said Ben Graboske, SVP of real estate and financial services for CoreLogic.

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