JPMorgan may be trying to put the sins of the past behind it; however, put-back risk for the industry is alive and well despite efforts by the federal government to impose what it deems to be appropriate mortgage underwriting standards.
What's keeping private-label RMBS investors up at night, and what could attract more capital, setting the stage for a broader recovery.
Through bitter experience, bond purchasers learned about the moral hazard embedded in private RMBS and their grossly inadequate legal protections.
While Qualified Mortgage and Qualified Residential Mortgage Rules are designed to increase mortgage quality, investors must be cautious about privately issued securities in a post-GSE era where the underlying loans are subjected to a particular lenders underwriting and sourcing processes.
As refinancing volumes plummet, lenders are trying to extend the home financing boom by pitching adjustable-rate mortgages to borrowers, harkening back to the pre-crisis boom years.