Standard & Poor’s proposed rating criteria for commercial MBS would not impact three-quarters of conduit deals but could result in upgrades for some securities and downgrades for others, according to the rating agency. Whether the proposed criteria enhancements would restore CMBS issuers’ confidence in S&P ratings is unclear, but observers say that the potential for higher ratings for some securities could pave the way for S&P to regain its exalted spot in the CMBS market. Last year, S&P shocked the market when it refused...

A German-based, state-owned lender has filed suit in a Manhattan court against Great Britain’s second-largest bank, alleging it sold over $274 million of non-agency MBS under false pretenses.Bayerische Landesbank contends in its lawsuit filed Aug. 3 in New York State Supreme Court that Barclays PLC issued offering materials that contained “material misrepresentations and omissions” regarding the underwriting standards used while issuing the residential MBS.Barclays’ offering materials also allegedly misrepresented...

As the “shadow” banking sector has grown and evolved since the 1970s, questions have arisen as to the extent to which traditional banks may have been displaced by other financial institutions, insurance companies and entities as alternate sources of financing and the credit enhancement to securitization transactions. However, three economists at the New York Federal Reserve Bank recently found that, contrary to the notion that banks are being eclipsed by other institutions, banks have held their own against insurance companies involved in the enhancement business, despite their underdog status. “The first thing to note is that enhancements by insurance companies outnumber...

A recent Congressional report confirms there’s been a jump in the drop-out rates for students at for-profit colleges, and that’s bad news for investors in the securitizations backed by loans to these students, according to market analysts. “A two-year investigation by the Senate Committee on Health, Education, Labor and Pensions demonstrated that federal taxpayers are investing billions of dollars a year – $32 billion in the most recent year – in companies that operate for-profit colleges,” said a report by the committee. “Yet, more than half of the students who enrolled in those colleges in 2008-09 left without a degree or diploma within a median of four months. That compares with 46 percent in a study by the Department of Education of a 2003-04 cohort, which itself reflected...

On recommendation by its Inspector General, the Department of the Treasury is developing written policies and procedures for selecting financial agents that will require full and timely documentation of the selection process. The recommendation was prompted by an IG audit of Treasury’s selection of financial agents for the Agency MBS Purchase Program, which is no longer in operation. Treasury acquired a total of $225 billion of agency MBS under the program, which the agency began selling in March last year when market conditions improved. Sales were completed in March 2012. State Street Bank and the New York branch of Barclays Bank were selected...

Both Fannie Mae and Freddie Mac emerged from the second quarter of 2012 firmly in the black with each company posting a free-and-clear profit – only the second time for each GSE since being drafted into government conservatorship nearly four years ago. The period ending June 30, 2012, marks the second consecutive quarter that Fannie will not require taxpayer assistance to keep the company going. Freddie will also not require an additional draw from the U.S. Treasury, the first time since the first quarter of 2011 which was the first time ever either GSE posted a profit since before conservatorship.

The Federal Housing Finance Agency captured the industry’s attention this week by formally citing “significant concerns” about proposals to use local government eminent domain powers, a paradigm shift the agency sees as potentially costly to Fannie Mae, Freddie Mac and the Federal Home Loan Banks. In a request for public comment, published in the Aug. 8 Federal Register, the Finance Agency warned that “action might be necessary” on its part “to avoid a risk to safe and sound operations” at the GSEs and to avoid taxpayer expense.

Fannie Mae will soon require all of its servicers – and any subservicer or third-party originator the servicer uses – to be in full compliance with the requirements of the Housing and Economic Recovery Act of 2008, the GSE announced this week. “On or before Nov. 1, 2012, the servicer is required to complete a Fannie Mae supplier registration profile that accurately reflects its ownership status, regardless of whether it is ‘HERA-Inclusive,’ and its team composition report,” explained Fannie.

The Federal Home Loan Bank Office of Finance announced last week that preliminary combined net income for the FHLBanks dropped 24.7 percent to $552 million in the second quarter of 2012, down from the $733 million in the first quarter but more in line with the $515 million earned in the fourth quarter 2011. The FHLBanks net income for the six months ended June 30, 2012, was $1.285 billion, an increase of $676 million or 111.0 percent compared to the same period in 2011, said the Office of Finance.“The FHLBank system continues to fulfill its mission to make available favorably priced wholesale funding to members while supporting the FHLBank system’s commitment to affordable housing,” said the OF. “In addition, the FHLBanks continue to strengthen the FHLBank system’s capital base through increased retained earnings.”