Observers of the subprime auto ABS market are raising concerns as delinquencies rise above peaks seen during the financial crisis as lenders have loosened underwriting standards in search of market share. According to Fitch Ratings’ index of subprime auto ABS, 60+ day delinquencies on loans backing the securities hit 5.45 percent at the end of 2016. Delinquencies were up from 4.70 percent at the end of 2015 and 41 basis points higher than the peak for the sector in 2009. The index tracks an outstanding balance of $38.6 billion from 149 transactions. There were 21 active shelves in the index, up from 12 active issuers in 2010. “Smaller lenders along with recent new entrants are...
Housing finance reform, especially if it weakens mortgage underwriting standards, could have a negative impact on private-label MBS as well as the government-sponsored enterprises’ credit risk-transfer transactions, according to a newly published report from Moody’s Investor Services. Analysts said that various reform proposals could reduce the influence that Fannie Mae and Freddie Mac have in the market and likely increase credit risk in new MBS in the short-term. Combined with a rising interest rate environment, such reform could have a credit-negative effect. Loan origination processes and the kinds of loans produced could become...
Wells Fargo, Deutsche Bank and the Royal Bank of Scotland have agreed to pay investors $165 million to resolve allegations of misrepresenting the quality of mortgage loans underlying securities issued by now-defunct subprime lender NovaStar Mortgage. The agreement was announced last week subject to approval by Judge Deborah Batts of the U.S. District Court for the Second District of New York, according to a report by Reuters. At issue is $7.7 billion in residential MBS delivered into various trusts and sold to investors, including pension funds, prior to the housing crash. A multi-employer union pension plan led by the New Jersey Carpenters Health Fund filed...
Last year was a decent enough year for the student loan sector, and so far this year, the space is looking dramatically more robust, according to analysts at the DBRS ratings service. New issuance so far in 2017 is more than twice that from the same period last year, with volume exceeding $4.5 billion, according to Jon Riber, a senior U.S. ABS ratings analyst at DBRS. “There are...
Esaki and White propose allowing issuers to choose any number of rating services to submit credit support levels for a particular MBS or ABS, paying a bid-preparation fee for each estimate.
A proposal from a former high-ranking official at S&P Global Ratings to reduce incentives for rating shopping has been met with skepticism and resistance from officials at other rating services. Howard Esaki, the former global head of securitization research at S&P Global Ratings, and Lawrence White, a professor of economics, NYU Stern School of Business, recently published a proposal to reform the process for how rating services are selected to grade MBS and ABS. They said...
There have been scattered reports that some lenders and brokers are still chasing quick-turn refis aided by secondary market investors offering to buy and securitize those loans.
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