JPMorgan (JPM) Chase Co. is planning its second sale of U.S. home-loan securities without government backing since the financial crisis the debt helped to trigger.

The bonds will be backed by $443 million of “high-quality” so-called jumbo mortgages, according to statements e-mailed today by Kroll Bond Rating Agency and DBRS Ltd., which expect to grant top grades to most of the notes. Jennifer Zuccarelli, a JPMorgan spokeswoman, declined to immediately comment.

The deal, like a $616.3 million transaction in March by the New York-based bank, contains relatively weak contractual promises that lenders or the issuer will repurchase loans that fail to match their promised quality, DBRS said. Sellers have begun taking different approaches to those terms as issuance in the so-called non-agency mortgage-bond market revives.

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Still, “the representations and warranties framework in this transaction does show some improvements” from JPMorgan’s last deal, including how fraud is defined, DBRS analysts including Claire J. Mezzanotte and Quincy Tang said in the statement.

DBRS and Kroll said that they took the weaker provisions into account in assigning grades to the securities.

Fitch Ratings, which will also rate most of the notes, said in a report that it was not asked to rank a $13.7 million slice of the offering. That tranche was granted AAA ratings by DBRS and Kroll. But Fitch said the risk of the debt means it deserves an AA grade, two levels lower.

Slow Acceleration

Issuance of non-agency bonds has been tied to about $6 billion of new loans this year, increasing from about $3.5 billion in all of 2012, according to data compiled by Bloomberg. Barclays Plc analysts said in a May 21 report that the expansion will be slow to accelerate and maintained a 2013 forecast of $12 billion to $15 billion. Sales peaked at about $1.2 trillion in each of 2005 and 2006.

The relative yields buyers demand on the bonds have been widening as issuance increases and amid investor concern that government-backed housing debt offered better value and that the mortgages will prepay slower than expected if interest rates rise or faster if they fall.

A May 17 offering by Redwood Trust Inc. (RWT) included $299 million of top-rated bonds that priced to yield 2.82 percent, or 1.90 percentage points more than benchmark swap rates. That compared with spreads of 1.75 percentage points on similar securities sold last month by the Mill Valley, California-based firm and as low as 0.97 percentage point in January.

Jumbo home loans are larger than allowed in government-supported programs, currently as much as $729,750 for single-family properties in high-cost areas. For Fannie Mae and Freddie Mac loans with the lowest costs for borrowers using 20 percent down payments, limits range from $417,000 to $625,500.

–Bloomberg News–

Article source: http://www.investmentnews.com/article/20130525/FREE/130529947

Article source: http://www.star-telegram.com/2013/05/24/4882411/voters-to-decide-on-new-reverse.html

By ANDREA COOMBES

The ultralow interest rates that are eating into retirees’ fixed-income portfolios pose a separate yet vexing conundrum for those same older Americans: Should I pay off the mortgage?

Given that interest rates currently average just 3.5% on a 30-year, fixed-rate mortgage, that may not be the smartest decision for the multitude of Americans whose retirement account is worrisomely small.

“From a purely financial perspective, accelerating payment on a low-rate, tax-deductible debt is a low financial priority,” says Greg McBride, senior financial analyst with Bankrate.com.

Keeping your money in more liquid assets—available to you if needed in retirement—plus allowing it to grow over time, may be your best bet, Mr. McBride and others say.

“If I have a choice of pulling $100,000 out of a balanced portfolio or having $100,000 in debt, I think having $100,000 debt at 3.5% is pretty darn good, making sure that $100,000 is invested in a balanced portfolio,” says Gordon Bernhardt, president and chief executive of Bernhardt Wealth Management in McLean, Va.

Your tax situation also affects the decision If you enjoy a healthy mortgage-interest tax deduction—that will depend on your tax bracket and the amount you owe—the value of paying off your mortgage drops even further. But if you’re no longer claiming the deduction, it may make sense to start paying down that debt rather than investing the money.

And there are other considerations. Paying off a mortgage just feels good (or so they tell me). Among his clients, the vast majority paid off their debt before retiring, says Paxton Farese, founder and chief executive of Farese Group in Ridgeland, Miss.

“The financial security and the peace of mind,” he says, “is certainly the No. 1 reason that people want to do it.”

—Email: andreacoombes@outlook.com

Article source: http://online.wsj.com/article/SB10001424127887324715704578483291141429974.html?mod=googlenews_wsj

Article source: http://www.washingtonpost.com/realestate/mortgage-giants-make-it-easier-for-retirees-to-secure-loans/2013/05/23/a51924ce-c162-11e2-ab60-67bba7be7813_story.html

Article source: http://www.washingtonpost.com/realestate/tips-on-selecting-the-right-mortgage-lender/2013/05/23/b30a8258-b90b-11e2-aa9e-a02b765ff0ea_story.html

Fri May 24, 2013 4:08pm EDT

By Karen Freifeld

NEW YORK May 24 (Reuters) – New York Attorney General Eric
Schneiderman said there is mounting evidence that Bank of
America Corp, Wells Fargo and Co and other banks
violated the terms of a settlement designed to end mortgage
servicing abuses.

Schneiderman – who has said he plans to sue Bank of America
and Wells Fargo for failing to live up to their obligations
under the deal – said other states had found similar problems.

“Several other states have identified similar recurring
deficiencies by the participating servicers,” Schneiderman said
in a letter dated May 23 to the monitor for the settlement,
former North Carolina Banking Commissioner Joseph Smith. The
letter was obtained by Reuters on Friday.

The $25 billion settlement was brokered last year between
five banks and 49 state attorneys general. The other banks are
JPMorgan Chase Co, Citigroup Inc, and Ally
Financial Inc. The banks agreed to provide relief to
homeowners and comply with a set of servicing standards to atone
for foreclosure misconduct.

In his letter, Schneiderman did not identify which other
states had provided evidence of banks failing to abide by the
settlement. Nor did he identify the banks with recurring
deficiencies.

He said receipt of his letter to Smith and a concurrent one
to a monitoring committee would start the clock on a waiting
period before lawsuits could be filed against the banks. The
settlement authorizes the monitor to first work with a mortgage
servicer to correct any potential violations and sue if the
servicer does not fix the errors.

Schneiderman said on May 6 he planned to sue Bank of America
and Wells Fargo after the waiting period was over, although he
did not mention the possibility of a lawsuit in Thursday’s
letter.

At the time, Schneiderman said that, since last October, his
office had documented 339 violations of standards – 210 by Wells
Fargo and 129 by Bank of America – dictating the timeline for
banks to process mortgage modification applications.

In Thursday’s letter, Schneiderman said the violations
reveal the two banks “are engaging in much of the same
misconduct that precipitated the National Mortgage Settlement.”

Smith said in a statement Friday he would review the
violations Schneiderman shared. He also said he will issue a
report on the banks’ compliance in June. “I intend to use the
full breadth of my power under the settlement to hold the banks
accountable,” he said.

North Carolina Attorney General Roy Cooper, who is on the
monitoring committee, said in a conference call on Tuesday that
some banks have “fallen short” of complying with servicing
standards. He did not name any banks.

In Thursday’s letter, Schneiderman said there had been
“inordinate delays” in reviewing loan modification applications
at Wells Fargo, so applicants had to resubmit documents.

He cited evidence of piecemeal requests for additional
documents in one modification application at Bank of America,
and said more than three months passed without a request for
more information or a decision on another application.

Bank of America has said it did not commit any violations,
and that it has provided more relief under the settlement than
any other servicer. Wells Fargo has said it was committed to
abiding by the settlement.

Citibank said on Friday it remains committed to fulfilling
the terms of the settlement. JPMorgan spokesman Tom Kelly
declined to comment. Ally said its bankrupt mortgage subsidiary
Residential Capital is responsible for the settlement. A
spokesperson for ResCap could not immediately be reached for
comment.

On Tuesday, Smith reported that the five banks in the
settlement had distributed $50 billion in direct relief to over
620,000 homeowners as part of the settlement.

Article source: http://www.reuters.com/article/2013/05/24/banks-mortgages-schneiderman-idUSL2N0E518V20130524

Once upon a time, hardly anyone defaulted on a mortgage. Bankers made sure that their borrowers had mortgages they could afford, because if they didn’t, the bank would suffer a loss. Lenders were highly motivated to keep homeowners in their castles. Then, early last decade, mortgage securitization exploded on the scene, disrupting the fairy tale. Big, ugly giants with names like Countrywide Financial and New Century packaged huge pools of mortgages, sliced them up into securities, and sold them to investors, who now bore the risk if the loans defaulted. Because the mortgage bundlers — or “securitizers” — were paid upfront, they had powerful incentives to generate as much volume as possible, with little regard to whether homeowners could afford the loans. “I’ll be gone, you’ll be gone” or “IBG/YBG” became their mantra. They pushed loans whose interest rates would later spike, and of course, the infamous NINJAs — mortgages that required no income, no job, and no assets. Yield-hungry investors snapped them up. And as we all know, this story did not end happily: Millions of mortgages defaulted, leading to the worst financial crisis since the Great Depression and a still-struggling economy.

MORE: 3 surprising reasons to cheer falling commodities

We thought the Dodd-Frank financial-reform law fixed all this by requiring securitizers to keep some skin in the game. Under the law, for every dollar of loss suffered by mortgage-backed securities investors, at least 5¢ must be borne by those who securitized the mortgages. In that way, the law aligns the interests of borrowers, securitizers, and investors in making sure mortgage loans are affordable and sustainable over time. Unfortunately, in an effort to get the 60 votes needed under Senate rules to move Dodd-Frank forward, the bill’s sponsors agreed to make a limited exception to the skin-in-the-game requirement. The law exempted loans meeting standards so tight that there was little, if any, chance they would default. But as it turns out, that wasn’t good enough for the financial and housing industries. They are now arguing for regulatory changes that would allow this exception to swallow the rule. Enlisting the aid of several affordable-housing advocates, they have argued that making securitizers retain risk will lead to higher mortgage rates, hurting low-income families who can’t meet tough mortgage standards. Instead, they say, loan bundlers shouldn’t have to retain any risk if the loans they securitize meet the basic lending standards set by the Consumer Financial Protection Bureau. Those standards, however, focus on consumer protection, not on system stability. They address the most egregious pre-crisis lending practices, such as failure to document income, but they include no down payment requirement and permit total mortgage and other debt payments to reach a whopping 43% of pretax income. (The industry standard was closer to 35% before the subprime craze.) Virtually all mortgages being originated today already meet those standards.

MORE: This country needs another financial crisis

Obviously, having to bear 5% of the losses on defaulting loans will increase securitizers’ funding costs. But those costs will be offset by the benefits of imposing some financial accountability on them to make sure mortgages carry terms that are affordable. We saw the disastrous results of IBG/YBG when mortgage bundlers could walk away from the loans they securitized. And far from helping low-income families, they gouged less sophisticated borrowers with mortgages carrying steep rates and fees because those loans commanded bigger upfront payments when securitized and sold to investors.

Instead of loosening standards to appease the industry, regulators should make it virtually impossible for securitizers to escape having skin in the game. The consumer bureau’s lending standards are helpful, but financial accountability can be a much more powerful tool to discourage irresponsible lending. Securitization’s skewed incentives transformed home ownership from the American dream to a Brothers Grimm nightmare. We need to make sure it never happens again.

Sheila Bair is former chair of the FDIC. Barney Frank is the former chairman of the House Financial Services Committee and co-author of the Dodd-Frank Act.

This story is from the June 10, 2013 issue of Fortune.

Article source: http://money.cnn.com/2013/05/23/news/economy/mortgage-backed-securities.pr.fortune/index.html

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Article source: http://online.wsj.com/article/SB10001424127887324659404578500983519041140.html

Ellington Management Group LLC, the
$5.5 billion investment firm founded by Michael Vranos that
specializes in mortgage-backed bonds, hired Steven Abreu from
GMAC Mortgage to start an origination business.

Abreu, the former president of GMAC Mortgage, starts at Old
Greenwich, Connecticut-based Ellington today in the newly
created role of head of mortgage originations, the company said
in a statement, a copy of which was obtained by Bloomberg News.
Abreu will seek to buy one or more originators through its
publicly traded affiliate, Ellington Financial LLC (EFC), according to
the statement.

Investment firms including Pine River Capital Management LP
and Angelo Gordon Co. have taken steps to move into the
mortgage-origination and servicing market amid a rebound in new
home loans. Lenders made $1.9 trillion in new mortgages last
year, the most since 2007, as borrowers refinanced to take
advantage of record low interest rates and federal programs
helped homeowners. Originations fell to $500 billion in the
first quarter from $525 billion in the fourth quarter, according
to data compiled by Bloomberg from Inside Mortgage Finance.

Ellington is beginning to see consolidation in the industry
and will purchase small- or medium-sized originators, Laurence
Penn, Chief Executive Officer of Ellington Financial, said in a
telephone interview. Ellington Financial has more than $650
million of equity, a portion of which may be used for the
acquisitions.

‘Top-Tier’

“While our typical acquisition target may currently be
originating $1 billion to $3 billion per year, our long-term
goal is to build a top-tier national originator with $20 billion
or more of originations per year,” Vranos, chief executive
officer of Ellington Management Group, said in an interview.

Abreu, 48, had been president of GMAC Mortgage since 2009.
The company was owned by Ally Financial Inc. (ALLY)’s Residential
Capital LLC mortgage unit, which filed for bankruptcy last year.
Before GMAC Mortgage, he was chief executive officer and
president of GreenPoint Mortgage Funding Inc.

Ally, the auto lender majority owned by the U.S.
government, agreed to pay $2.1 billion to avoid lawsuits by
unsecured creditors of ResCap, according to a court filing
today.

Private-equity firm Cerberus Capital Management LP said in
a February filing tied to the potential initial public offering
of a mortgage real-estate investment trust that the company
might purchase lenders. Pine River and Angelo Gordon have
expanded their efforts on the mortgage-origination and servicing
side to help fuel earnings of publicly traded mortgage-investment companies they oversee.

Private Capital

“We think that private capital is going to be more and
more important in the next phase of the mortgage-finance
industry in the United States,” as U.S.-controlled Fannie Mae
and Freddie Mac raise their guarantee fees to scale back the
government’s role in financing about 90 percent of new loans,
Abreu said.

The biggest opportunity currently is in agency mortgages,
or those backed by the U.S. government, he said. Long term, the
firm expects non-agency originations will represent a bigger and
more important part of the business.

Market Share

Wells Fargo Co. has been the biggest originator with 22
percent of the market in the first quarter, followed by JPMorgan
Chase Co. and Quicken Loans Inc., the largest non-bank
originator, according to data compiled by Bloomberg.

In addition to origination fees, lenders can earn fees from
mortgage-servicing rights, which involves sending out bills,
performing collections and handling the costly foreclosure
process if the borrowers don’t pay. Wells Fargo, Bank of America
Corp. and other lenders have been selling servicing rights
because proposed capital rules would classify them as riskier
assets that require more equity to cover potential losses.
Buyers include firms such as Ocwen Financial Corp., which
specialize in servicing and aren’t subject to the same rules as
banks.

Independent mortgage banks and mortgage subsidiaries of
chartered banks made an average profit of $2,256 on each loan
they originated in the fourth quarter of 2012, down from $2,465
per loan in the third quarter, as increasing costs outweighed
higher revenues, the Mortgage Bankers Association reported April
2.

Ellington, founded in 1994, manages portfolios of
residential mortgage-backed securities, both those that have and
lack support by the U.S. government; invests in assets including
commercial mortgage loans, commercial mortgage-backed
securities, asset-backed securities; and makes direct
investments in single-family and multi-family real estate. It
also uses systematic strategies to invest in equities and
futures.

To contact the reporters on this story:
Kelly Bit in New York at
kbit@bloomberg.net;
John Gittelsohn in Los Angeles at
johngitt@bloomberg.net;
Jody Shenn in New York at
jshenn@bloomberg.net

To contact the editor responsible for this story:
Christian Baumgaertel at
cbaumgaertel@bloomberg.net

Article source: http://www.bloomberg.com/news/2013-05-23/ellington-hires-gmac-mortgage-head-for-new-business.html

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Article source: http://online.wsj.com/article/SB10001424127887324659404578499494252696334.html