Moody’s Investors Service continued to rank as the top credit rating agency in the non-mortgage ABS market, putting its stamp on 66.9 percent of dollar volume of deals issued in the first half of the year, according to a new Inside MBS & ABS analysis. Moody’s was particularly strong in the vehicle finance and business loan sectors, with market shares approaching 75.0 percent in both categories. The company showed relatively little interest in the student ABS market, but ranked second in rating credit card deals. Standard & Poor’s ranked second overall with a 58.3 percent share of ABS ratings. That included a near...(Includes two data charts)

The strategic default problem is not going away, keeping pressure on servicers and MBS investors to find ways to dis-incentivize these actions. House prices continue to fall, and more underwater homeowners are willing to batter their credit rating and default on their mortgage to get out of an uneconomic deal. In a recent report, analysts at Deutsche Bank said the threat of legal action and risks to assets other than the mortgaged property play a large role in a homeowner’s decision to strategically default. Eleven states are considered non-recourse states, either because they explicitly forbid deficiency judgments or...

Securitization market participants continue to face significant uncertainty from regulatory forces on both sides of the Atlantic that is dampening securitization activity, raising costs and probably leaving some deals undone. Much of the problem stems from capital requirements and the use of credit ratings, which have fallen into disrepute among many lawmakers and regulators in the wake of the collapse of the subprime mortgage market and the resulting credit market freeze in 2008. After last year’s enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Federal Reserve, the Federal Deposit Insurance Corp., the...

Transparency, investor access to information and a willingness to engage in loss mitigation can help reduce the wave of litigation and investor losses resulting from repurchase demands, according to mortgage litigation experts. There’s a better alternative to fighting out buyback claims in court: all counterparties should sit down and find ways to resolve issues that trigger repurchase claims in an open and forthright manner, said panelists on a webinar hosted by Inside Mortgage Finance Publications. “We have to work together because the country is hurting and the longer this drags on, the bigger the problem is going...

Investors in non-agency mortgage-backed securities would rather not fight in court to enforce buybacks, according to Talcott Franklin, shareholder of his namesake law firm. However, Franklin said litigation has been necessary because servicers – largely those affiliated with lenders or MBS issuers – have not done enough to prevent losses. “If the banks can get it together on the servicing side and try to reduce these losses, that is going to be the best way for them to proactively reduce these [buyback] risks,” he said this week during a webinar hosted by Inside Mortgage Finance Publications. ...

Lenders looking to participate in Redwood Trust’s jumbo securitization efforts must meet high standards, according to a review of the real estate investment trust’s new jumbo mortgage-backed security. The major originators in the $375.2 million jumbo MBS Redwood issued last week were all considered “above average” by Fitch Ratings. Redwood has invested significant resources into its jumbo conduit and correspondent program in an effort to revive non-agency securitization. ...

Ginnie Mae is following its own path in exploring potential changes to servicer compensation, a project that parallels the Federal Housing Finance Agency’s Joint Initiative on Fannie Mae/Freddie Mac servicing compensation. As part of the FHA’s effort to improve default servicing, Ginnie Mae and other government housing agencies will be working separately to develop better claims mechanisms and pooling services as well as clearer risk and warranty delineations to improve the value of securitizations, the FHFA said. In a discussion paper, the FHFA, which oversees Fannie Mae, Freddie Mac and the Federal Home Loan Banks, said ...

State attorneys general trying to negotiate a big-ticket settlement with top mortgage servicers saw their coalition fracture further over the past week, including a decision by Massachusetts to move independently toward litigation. A major stumbling block continues to be divergent views among the states on whether lenders should get immunity from non-servicing issues such as potential litigation over securitization as part of the deal. The widely held view is that top banks were willing to put up a combined $20 billion to be used to help struggling borrowers to settle legal challenges that were spawned by...

Debt-for-equity, a strategy commonly used in buyout deals among companies in Europe, is being floated as an idea to help underwater U.S. homeowners and the lenders avoid taking bigger losses if the mortgage ends up going to foreclosure. In a debt-for-equity arrangement, the borrower would refinance an underwater mortgage for a new loan that reflects the house’s current market value as an alternative to going to foreclosure. In return for reducing the loan amount, the lender takes an equity position that allows it to share in any future house price appreciation.Proponents say...

Its decision to dump its wholesale correspondent channel is the latest in a series of moves by Bank of America to distance itself from “legacy” mortgage issues, but analysts remain doubtful. Moody’s Investors Service last week downgraded the bank’s rating. “The downgrades result from a decrease in the probability that the U.S. government would support the bank, if needed,” thanks to the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the ratings firm said. Moody’s said that the government is likely to continue to provide some level of support to systemically important financial institutions. “However, it is also...