The U.S. banking industry is a steady, but not a huge, supporter of the non-mortgage-ABS market, accounting for 17.4 percent of the supply of ABS outstanding at the end of 2016, according to a new call-report analysis by Inside MBS & ABS. By comparison, banks and thrifts held about 26.5 percent of MBS outstanding at yearend. Although ABS issuance since the financial crisis has dwarfed production of non-agency MBS, the market still hasn’t fully recovered. The Securities Industry and Financial Markets Association reports that total ABS outstanding – not including collateralized debt obligations – declined by 0.3 percent during the fourth quarter to $712.1 billion. That’s still well below the total outstanding at the end of 2007, $899.8 billion. Commercial banks and thrifts reported...[Includes two data tables]
The deal-agent role that some investors are pushing for in new non-agency MBS will complete or oversee many of the tasks that are already present in transactions with one important caveat: the deal agent has a responsibility to protect investors. A deal agent will oversee various participants in an MBS, oversee enforcement of representations and warranties, and have a fiduciary duty to investors. Yehudah Forster, a vice president and senior credit officer at Moody’s Investors Service, said...
A transparency feature included in the Dodd-Frank Act aimed at helping MBS and ABS investors understand the representations and warranties on a transaction has created a significant amount of work for rating services with little benefit for investors, according to officials at ratings firms. Since June 2015, rating services have been required by the DFA to compare the reps and warrants on a transaction they’re rating with a benchmark set of reps and warrants for that asset class. These 17g-7 reports often span hundreds of pages, detailing similarities and differences between the reps and warrants on a specific transaction compared with a set of benchmarks established by the rating services. Claire Mezzanotte, a group managing director and head of global structured finance at DBRS, said...
MBS are likely to be hurt when the Federal Reserve stops its reinvestments to shrink its balance sheet over the next few years, according to an analysis by Desjardins, Canada’s largest cooperative financial group. Even though the agency plans to withdraw gradually, its $1.75 trillion in MBS holdings account for approximately 20 percent of all U.S. MBS outstanding, noted Mathieu D’Anjou, senior economist with the Desjardins Group. “An increase in rate spreads between MBS and U.S. bonds, [which is] currently low, could be required...
Online consumer lender Prosper Marketplace, based in San Francisco, recently finalized a deal with a consortium of institutional investors to purchase as much as $5 billion of the lending platform’s unsecured consumer loans during the next two years. The consortium comprises investment bank Jefferies Group LLC and three asset managers: affiliates of New Residential Investment Corp., Third Point LLC, and an unnamed entity of which Soros Fund Management LLC serves as principal investment manager. Under the terms of the deal, the consortium will earn...
Tricon Capital Group’s recent announcement that it plans to buy single-family rental operator Silver Bay Realty Trust for $1.4 billion in cash is a potential sign that this thriving sector could be in for a round of consolidation. Once the deal is completed, the combined SFR company will have 16,800 homes in its stable of rentals – 9,000 coming from Silver Bay and 7,800 coming from Tricon American Homes, the U.S. residential division of the Toronto-based TCG. Among SFR operators, TAH/SBRT will rank...
Contrarians may suspect a bubble, but analysts at DBRS said in a new report this week that credit card loan balances in the U.S. reached a new post-financial-crisis high in December 2016, which they characterized as a reflection of consumers’ “gradual inclination to judiciously undertake incremental credit card debt.” According to their analysis, credit card debt accelerated last year. “After steadily increasing over the past five years, growth in credit card debt accelerated in 2016 at an average monthly, year-over-year growth rate of 6.1 percent, compared to 4.2 percent in 2015, and 2.9 percent in 2014,” DBRS said. Citing the Federal Reserve data for December 2016, the analysts found...
A common theme among housing finance reform proposals is to infuse more private capital into the system while not disrupting the market. Beyond that, the plans take significantly different approaches about what to do with Fannie Mae and Freddie Mac. Jim Parrott, senior fellow at the Urban Institute and the co-author of one of those proposals, released a paper this week comparing his plan with the revised proposal from the Mortgage Bankers Association and a blueprint described by the Milken Institute. The MBA proposed...
According to an Inside Mortgage Finance analysis, Fannie and Freddie have passed along some $9.6 billion of MBS fees under the provisions of the 2011 Temporary Payroll Tax Cut Continuation Act.
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