The Treasury Department should not bail out the GSEs’ subordinated debt again, according to Alex Pollock, senior fellow at the R Street Institute. He criticized the Treasury’s decision to pay off $13.5 billion in subordinate debt at the start of the conservatorship nine years ago and said that it created a lack of market discipline. “Instead of experiencing losses to which subordinated lenders can be exposed when the borrower fails, they got every penny of scheduled payments on time,” he said, calling the structural reason for bailing out the subordinated debt an “unusual occurrence.” The former head of the Federal Home Loan Bank of Chicago noted that the role of subordinated debt is...
The GSEs’ credit-risk transfer program remained healthy in the second quarter having issued a combined $4.48 billion of credit-risk transfer debt. That’s up 5.8 percent from the first quarter but an impressive 25.4 percent more than midyear in 2016. Moreover, since the second quarter, Fannie has already priced two more of its popular Connecticut Avenue Securities risk-sharing deals. July and August marked the 5th and 6th transaction of CAS deals issued this year. The most recent deal was CAS Series 2017-CO6, a note offering $1.069 billion that was expected to settle this week.
The Federal Housing Finance Agency Office of Inspector General recently released a white paper highlighting the GSEs’ pre-conservatorship statutory capital requirements and their current shortfalls.With the 2008 conservatorship, capital requirements for Fannie Mae and Freddie Mac were suspended so the paper mostly emphasizes the lack of capital for housing-finance and GSE reform debate purposes. “Because of heightened public interest in the role of the enterprise, if any, in the future structure of the housing finance system, FHFA-OIG prepared this white paper to explain the current statutory and regulatory capital requirements for the enterprises,” it explained.
Whether increased competition in the government mortgage-backed securities market would benefit the industry as a whole continues to be a bone of contention in the housing market. While some believe any talk of GSE reform should include ending the duopoly of Fannie Mae and Freddie Mac by adding more guarantors to the mix, small lenders in particular say they already have their hands full keeping up with requirements for the two GSEs.
Fannie Mae, Freddie Mac and Ginnie Mae issued a combined $41.95 billion of collateralized mortgage obligations backed by single-family MBS during the second quarter, according to an analysis and ranking by Inside MBS & ABS. Agency CMO issuance was down 17.2 percent from the first three months of the year, with Freddie taking the biggest hit – a 30.9 percent drop in production. Ginnie had the smallest quarterly decline, 5.1 percent. On a year-to-date basis, all three agencies are...[Includes one data table]
Even though indications of stress in the U.S. auto market are proliferating, risks in the auto loan ABS sector are still under control and investors are protected by healthy levels of credit enhancement, according to industry analysts. “Despite late-cycle indicators continuing to garner headlines – softer used-car pricing, rising inventories, weakening headline seasonally adjusted annual sales, and rising loan losses – we remain comfortable with auto loan ABS fundamentals,” according to a new report from Kroll Bond Rating Agency. KBRA did concede...
Relatively stable pricing and fairly healthy returns are giving mortgage reinsurers hope for a more robust market, according to a new analysis from Standard & Poor’s. Reinsurers seeking respite from a deteriorating property casualty reinsurance sector have found mortgage reinsurance a promising business diversification and source of growth – at least for now, said the rating service. However, reinsurers coming late to the feast might find...
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