A return for private label mortgages?

Is this year the comeback of “private label” mortgage bonds? About $25 billion worth were issued this year, paling in comparison to the $1 trillion peak in 2006, but up significantly from the $4 billion issued last year, the Wall Street Journal reported. Stabilizing U.S. housing values and firmed-up mortgage regulations have paved the way for lenders to issue these loans, which do not conform to Fannie Mae and Freddie Mac mortgage guidelines.

“For five years the industry has asked, ‘Is this the year of the comeback?” Jordan Schwartz, a partner at law firm Cadwalater Wickersham & Taft, told the Journal. “We may have finally found the bottom of the housing market, and if so, we’ve met one important condition for recovery.”

U.S. Comptroller of the Currency Thomas Curry said that housing is now adding to economic growth, which is required to increase credit availability in the sector. “Getting the securitization pipeline flowing again is a critical component in turning this picture around,” he said.

Still, the new mortgage regulations could put a damper on jumbo loans by keeping a borrower’s debt-to-income ratio at 43 percent. [WSJ] —Zachary Kussin