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Monday Morning Cup of Coffee: JPMorgan's $13B mortgage settlement

Mega bank moves quietly to escape legacy mortgage issues

October 20, 2013
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Monday Morning Cup of Coffee takes a look at stories across the HousingWire news desk, with more coverage to come on bigger issues.

JPMorgan Chase (JPM) inched closer to putting massive mortgage-bond litigation behind it on Friday. The only problem: It’s unknown how much more litigation and regulatory risk could hit the lending giant in the future.

After all, in just the past week, the Wall Street Journal ran a story suggesting that JPM has plans to settle with the Federal Housing Finance Agency for $4 billion as part of an agreement to end claims over toxic loans the bank allegedly sold to Fannie Mae and Freddie Mac before the housing crash.

Over the weekend, Reuters suggested the bank is close to a $13 billion deal with the Justice Department over lingering mortgage issues.

And while JPM is based in New York, and Wall Street is still reeling from a rough few weeks, there is some good news coming out of the Big Apple.

Chinese real estate hunters are keen on New York for starters, and it seems they will take Brooklyn real estate over Manhattan properties in a New York minute.

The Real Deal quoted a story from the Juwai website, which connects Chinese real estate investors to the U.S. housing market. Apparently, Brooklyn is known for offering better deals.

"The data show that Brooklyn is the most intriguing borough for Chinese, but they are still learning about it," Andrew Taylor, Juwai.com co-CEO said in a release. "They aren’t as familiar with the many attractive individual neighborhoods within Brooklyn as they are with the name of the borough itself."

The site ranked local cities based on how many Chinese site users searched for a particular location. It turns out Manhattan came in No. 2, followed by Queens, the Bronx and Staten Island.

The government and regulators don’t view themselves as the last resort for fixing troubles in the housing market. At least that's not the impression U.S. Comptroller Thomas Curry left during a recent speech to the National Asian American Coalition.

Instead, the Comptroller praised the work of housing counselors, suggesting they are unsung heroes and a force of good in the mortgage finance/housing system.

He added, "Recently, housing counselors fought hard to help borrowers avoid foreclosure and stay in their homes through the financial crisis. Over 50 percent of the clients who sought assistance through programs you offer were able to secure a loan modification."

Curry also stressed the need for post-purchase counseling to ensure first-time homeowners understand how to keep a balanced budget while paying for a home.

During a week threatened by a debt limit impasse and interest rate volatility, bonds moved higher and mortgages outperformed, analysts with Wells Fargo Securities said when reviewing agency MBS activity for the most recent week.

The 10-year Treasury yield for the period fell 9 basis points from the previous week, hitting 2.60%.

"Bonds moved higher, and mortgages generally outperformed as duration was better bid. Production and down-in-coupons fared better in the stacks, while up-in-coupons lagged," the WFC analysts said. "We remain neutral/market weight on the basis as fiscal uncertainty, continuing QE, and rich valuations keep large spread movements in either direction suppressed."

Meanwhile, spreads in non-agency RMBS tightened due to a lack of supply, Wells Fargo explained.

"Weekly trade volume was about $6.2 billion," the same report said. Still, new issuance came online with Fannie Mae pricing its risk-sharing deal, CAS 2013-C01, and Shellpoint came to market with another prime jumbo deal, SAFT 2013-2

The Federal Deposit Insurance Corp. did not close any banks during the week ending Oct. 18.

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