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Volume 2016 - Number 28

July 22, 2016

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ABS Market Was Sluggish in 2Q16, But Issuance Surged In Early July, Building to Strong Third-Quarter Tally

New issuance of non-mortgage ABS faltered in the second quarter of 2016, but the market has rebounded strongly in recent weeks, according to a new Inside MBS & ABS analysis. New ABS issuance totaled $43.07 billion in the second quarter, a modest decline from the first three months of 2016. That put year-to-date production at just $86.42 billion, off 18.0 percent from the first six months of 2015. Activity picked up...[Includes two data tables]

Chase to Issue Its Second Large Prime Non-Agency MBS Of the Year, Unclear if Other Big Banks Will Follow

JPMorgan Chase is preparing to issue a $2.65 billion prime non-agency MBS, including a large share of mortgages eligible for sale to the government-sponsored enterprises. While company officials see promise in the new type of securities, industry participants offer mixed projections on whether other big banks will follow its lead. The planned Chase Mortgage Trust 2016-2 received AAA ratings from Fitch Ratings and Moody’s Investors Service. Mortgages eligible for sale to the GSEs account for 55.0 percent of the dollar volume backing the deal. As with the $1.89 billion Chase Mortgage Trust 2016-1 that priced in March, the bank will retain...

Loan Limit Increases, Underwriting Loosens for MPF Direct Product Delivered to Redwood

The Federal Home Loan Banks’ Mortgage Partnership Finance program and Redwood Trust announced a number of changes this week to the MPF Direct product. Beginning Aug. 31, the loan limit will increase to $2.5 million and hybrid adjustable-rate mortgages will be eligible for delivery. The MPF Direct program was launched in 2014, with a loan limit of $729,750, the high-cost loan limit for the government-sponsored enterprises at the time. In the third quarter of 2015, the loan limit for the product was increased to $1.5 million. The loan limit for cash-out refinances is $750,000. “We continue...

Industry Reps Hope CMBS Bounces Back After Implementation of Risk-Retention Rules is Complete

Industry experts agree that the commercial MBS market is not going to live up to expectations of $100 billion of issuance this year, but they are hopeful the market will rebound after the industry fully implements the Dodd-Frank Act risk-retention rules that take effect Dec. 24, 2016. According to Kenneth Cheng, managing director of CMBS ratings services for Morningstar Credit Ratings, there is much uncertainty in the CMBS market about the actual impact of the risk-retention requirements. “I think everybody has agreed that it will be a negative impact – it’s just the magnitude of that impact that is uncertain,” he told Inside MBS & ABS this week. “It’s going to drive up the cost of CMBS – how much is anybody’s guess.” Also, as the cost of issuing CMBS increases, profit margins will...

Republican Platform 2016 Talks of Reduced Government Role, Ending Mandates

The Republican platform, released this week during the Republican National Convention, would scale back the government’s role in housing and make borrowers and lenders more responsible. But it offered a somewhat vague prescription for what to do with Fannie Mae and Freddie Mac. “Our goal is to advance responsible homeownership while guarding against the abuses that led to the housing collapse,” the platform states. The GOP said housing reform should include clear underwriting standards and guidelines on predatory and acceptable lending practices – standards that are arguably at the core of the Dodd-Frank Act that’s roundly criticized by the party. Republicans blamed...

Lenders Quietly Introducing Low-Downpayment Programs to Help Cash-Strapped Buyers

Mortgages that allow buyers to make low downpayments are making a quiet comeback, according to a recent analysis from Deutsche Bank. But do they have the staying power? So far, seven lenders have partnered with Fannie Mae and Freddie Mac in special programs to offer loans requiring anywhere from no money down to 3 percent down. Although the government-sponsored enterprises cap their high loan-to-value product at 97 percent, some lenders step in and subsidize the extra funds needed to make up the difference. The GSEs began...

Eleventh Circuit Opinion in GNMA-Related Case Shines Light on Two Important Securities Fraud Laws

Stakeholders in the MBS market should pay attention to a recent U.S. 11th Circuit opinion concerning a jury verdict in which the court focused on the similarities and differences between two kinds of securities fraud, suggested attorneys in their analysis of the case. Although the opinion in SEC v. Radius Capital Corp. is unpublished and not a binding precedent, it gives further clarity to two of the most important rules used by the Securities and Exchange Commission in targeting securities fraud, according to attorneys with the law firm Carlton Fields. The SEC sued...

Agency Servicers of High-Coupon Mortgages - 2Q16

MBS & ABS Issuance at a Glance

One page of issuance data.


The yield on the benchmark 10-year Treasury fell to all-time low of 1.34% recently. How much better will originations be at your shop in the second half compared to 1H, if at all?

Better by 1% to 10%.
Better by 11% to 25%.
Off the charts better. Applications are great now.
Worse than 1H, but not by much.
A lot worse. But not sure on the damage.

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