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...

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...

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...

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...

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...

Smaller issuers of Ginnie Mae mortgage-backed securities will find it easier to pledge mortgage servicing rights (MSRs) to obtain warehouse financing and better compete with their larger rivals, thanks to changes announced recently by Ginnie Mae. Changes to the “Acknowledgment Agreement” will make it simpler for Ginnie Mae to honor servicing pledges and allow the transfer of related servicing rights. They also clarify and limit the conditions under which Ginnie Mae can deny an issuer’s request to transfer servicing to the issuer’s creditor. Under the previous 2007 procedures, an issuer seeking Ginnie Mae’s approval to pledge its rights to servicing income as a security for a loan from a private lender must ...

Acquisitions of large non-agency portfolios by Bank of America and JPMorgan Chase resulted in poor servicing performance, according to a new analysis by Moody’s Investors Service. Successful borrower-contact initiatives, meanwhile, resulted in significantly improved servicing performance for others. “Integrating the servicing platforms, employees, processes, and technologies into their servicing operations overwhelmed the banks, reducing their ability to proactively address the increased number of problem loans in their combined portfolios,” Moody’s said. ...

The lower loan limits instituted this month for conforming mortgages opened a number of regional opportunities for non-agency lenders. As of Oct. 1, 250 counties have lower government-sponsored enterprise loan limits compared with the conforming loan limits of 2010, according to an analysis by affiliated publication Inside Mortgage Finance. Michael Fratantoni, vice president of single-family research and policy development at the Mortgage Bankers Association, said the portion of the market newly eligible only for non-agency financing is significant in comparison to the amount of non-agency jumbo originations in recent years. ... [includes one data chart]

A regulatory scare from the Securities and Exchange Commission may end up being much less of a challenge for real estate investment trusts than the stiff competition they face from bank portfolios, according to experts at the ABS East conference sponsored by Information Management Network this week in Miami Beach, FL. In September, the SEC rattled the mortgage REIT sector – which has struggled to gain a foothold in the nonconforming mortgage market – by launching a formal fact-finding mission on maintaining the exemption REITs enjoy from the Investment Company Act. ...

“We have to reduce uncertainty to bring private capital back,” Shaun Donovan, secretary of the Department of Housing and Urban Development, said at the Mortgage Bankers Association’s annual convention last week in Chicago. Industry participants remain divided on if or when non-agency securitization will resume in a significant manner. Daniel Arrigoni, president and CEO of U.S. Bank Home Mortgage, said U.S. Bank and other lenders must think about developing non-agency securitization capabilities as the federal government works toward reducing its involvement in housing finance. ...