So far a “broad cross-section” of industry participants and other stakeholders support the steps the Federal Housing Finance Agency has taken to establish a new securitization platform for residential MBS, the agency said in a progress report issued this week. “In light of the importance of this initiative to the housing finance system, and reinforced by the comments received from the public, FHFA has directed the enterprises to move forward on the development of the [common securitization platform],” the agency noted. In early March, FHFA Acting Director Edward DeMarco said...
Standard & Poor’s, along with Moody’s Investors Service, last week settled a lawsuit involving their pre-financial crisis securities ratings before it got to a jury trial, but S&P suffered a setback with another ratings challenge lawsuit brought by Connecticut state officials. Experts predict a pickup in MBS litigation ahead of pending filing deadlines for legal challenges. S&P and Moody’s reached the confidential settlement with a group of 14 plantiffs led by Abu Dhabi Commercial Bank and King County, WA. Abu Dhabi and the over investors filed suit in 2008 and 2009 in Manhattan federal court claiming that the defendants misled them by allegedly inflating ratings on two structured investment vehicles they purchased. By settling the investors’ lawsuit, which claimed $638 million in losses, S&P and Moody’s were able...
Issuance of securities backed by servicer advance receivables has increased significantly recently and is expected to continue to grow, fueled by nonbank servicers and demand from investors. However, analysts at Standard & Poor’s warn that servicers are increasing their use of unconventional features and product types, which could increase risks for investors. S&P rated $7.8 billion in servicer advance securities from the second quarter of 2012 through the end of the first quarter of 2013, up from $7.7 billion from the two-year period ending in the first quarter of 2012. S&P said issuance is expected to increase as more and more servicing assets trade hands and servicers use securitization to fund their collateral acquisitions. Recent issuance has been driven...
There were no real surprises this week from the Federal Open Market Committee, which announced it plans to continue purchasing additional agency MBS at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month. But observers continue to contemplate the Fed’s eventual exit strategy and how it will affect the markets. “The committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency MBS in agency MBS and of rolling over maturing Treasury securities at auction,” the FOMC said in what is becoming standard, boilerplate language. “Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.” Also, the committee plans...
Federal regulators said they will collectively work with Congress to reduce the agency market share of MBS issuance. The members of the Financial Stability Oversight Council said completion of the qualified-residential mortgage rule will also help increase non-agency activity. “The council recommends that the Treasury Department, the Department of Housing and Urban Development, and the Federal Housing Finance Agency continue to work with Congress and other stakeholders to develop and implement a broad plan to reform the housing finance system,” the FSOC said in its 2013 annual report, released late last week. Tobias Adrian, a vice president at the Federal Reserve Bank of New York and contributor to the report, said...
Repurchase agreements remain an important source of funding for agency MBS, collateralized mortgage obligations and other asset classes despite continued concerns about liquidity and regulatory risks, according to a Fitch Ratings analysis. As of March 2013, an estimated $1.83 million in assets were financed by the U.S. tri-party repurchase market, according to Fitch analysts Martin Hansen, Robert Grossman and Kevin D’Albert. The analysts noted...
Fannie Mae and IBM are working together on at least one big technology project: a new data center. But is the relationship about to go even further? Meanwhile, MBS issuance stayed hot in April.
Issuance of non-agency jumbo mortgage-backed securities continues to increase along with the number of issuers participating in the market. Issuers acknowledge that spreads on AAA non-agency MBS are widening, causing margins to decline, but they suggest that a significant increase in non-agency MBS production will help tighten spreads, benefitting issuers. Credit Suisse issued its third non-agency jumbo MBS of the year this week. The $393.77 million deal received AAA ratings from DBRS and ...
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