The stellar returns on non-agency mortgage-backed securities purchased via the Public-Private Investment Program have faltered this year, prompting some to call for a revamp of the program. Invesco – the fund that has seen the most success with the PPIP – also recently announced that it quit the program after having difficulties finding appropriate investments. ... [includes one data chart]

A new regulatory regime for non-agency securitization proposed last week by Rep. Scott Garrett, R-NJ, has attracted some support from non-agency mortgage-backed security issuers. However, the Private Mortgage Market Investment Act, which is aimed at reviving the non-agency market, also faces some bipartisan opposition. “This legislation, along with regulatory plans to ‘level the playing field,’ could spur a broad resurgence of the private MBS market in the short-term, for the benefit of homeowners, lenders, and investors,” said Martin Hughes, president and CEO of Redwood Trust, at a hearing this week by the House Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises. ...

As the picture of the revised Home Affordable Refinance Program finally came into greater focus this week, MBS analysts indicate that the impact of HARP 2.0 will neither be quite as terrible for MBS investors as feared, nor terribly helpful to the stagnant housing market and the economy at large. The Federal Housing Finance Agency made most of the changes the market expected and steered clear of one that might have boosted HARP business significantly: changing the eligibility cut-off date to give existing HARP borrowers a second crack at the program. The agency agreed to remove the 125 percent loan-to-value cap – although very little...

House Republicans have already introduced a variety of separate bills to clamp down on Fannie Mae and Freddie Mac while the two government-sponsored enterprises remain in conservatorship, and a key GOP lawmaker this week introduced legislation intended to jumpstart a private MBS market to take over when the agencies are finally dissolved. The Private Mortgage Market Investment Act, drafted by Rep. Scott Garrett, R-NJ, would create a heavily regulated MBS market made up solely of private entities functioning with no federal guarantee at all. The lawmaker, who chairs the House Financial Services Subcommittee on...

Mortgage securitization experts have not yet figured out how to preserve the liquidity and consumer benefits provided by the to-be-announced agency MBS market in a mortgage finance system that doesn’t have a role for government agencies. “The failure of the private market has been in figuring out how to encourage a solution with less government,” said Peter Nirulescu, a partner at Capital Market Risk Advisors, during a panel held by the Securities Industry and Financial Markets Association this week. Despite panelists’ varying perspectives, all agreed that the TBA market continued to perform robustly and any changes made to the...

New regulatory requirements – including a controversial plan to assign ratings on a rotating basis – are encouraging firms to test the traditional approaches to rating MBS and ABS, but some observers say the reliance on an issuer-pay business model will be tough to change. New rating services are coming up with new ways to assess risk with more dynamic, ongoing reviews and more sources of information, and they’re less reliant on being fed information, said Stephen Kudenholdt, co-chair of the capital markets practice at SNR Denton. But the expectation that the market would shift to an investor-paid model clearly hasn’t...

The European debt crisis, following not far behind the global financial market meltdown of a few years ago, has put more pressure on the covered bond market, but analysts at the ABS East conference sponsored by Information Management Network said the sector is holding up well and gaining more acceptance in other countries. Covered bonds have not been completely unscathed, said Michael Durrer, a partner at Sidley Austin LLP. But Canada is starting up a covered bond market, Australia has recently enacted legislation, New Zealand has seen its first transactions and Belgium – the last European...

All the major components of the non-mortgage ABS market saw significant declines in new issuance during the third quarter, returning new production to the levels experienced for most of the past two years. Total ABS issuance fell 43.4 percent to $24.84 billion, according to a new Inside MBS & ABS ranking and analysis. That followed a surge to $43.92 billion in the second quarter, that helped lift the total for the first nine months of 2011…

The chairman of the House subcommittee that oversees the GSEs unveiled a bill late this week that seeks to drastically overhaul the secondary mortgage market – without the need for Fannie Mae or Freddie Mac.The Private Mortgage Market Act would create a heavily regulated mortgage-backed securities market consisting strictly of private entities functioning without a federal guarantee, according to Rep. Scott Garrett, R-NJ.Garrett, who chairs the House Financial Services Subcommittee on Capital Markets and Government-Sponsored Enterprises, said the goal of his legislation is to facilitate continued standardization and uniformity, ensure rule of law and provide MBS investors with the necessary transparency and standardization to ensure “that a deep and liquid market develops” without Fannie and Freddie.

Not much has changed since the 2010 edition of the ABS East Conference, and the outlook for 2012 is hardly encouraging, but conference sponsor Information Management Network drew about 30 percent more participants to its annual industry gathering in Miami Beach this week. As one attendee put it, everybody at the conference was down on the market, yet nobody is buying and nobody is selling. Regulatory uncertainty continues to stymie securitization activity. The federal government still dominates the U.S. mortgage market, with little change in sight. Tepid economic growth is generating lackluster demand for...