In percentage terms, the sharpest downturn was in home-equity ABS, although this sector represented just 1.6 percent of bank ABS investment and there has been no new production in years.
Monique Rollins, deputy assistant secretary for the Treasury Department’s Office of Capital Markets, said the Treasury supports industry-driven efforts.
Commercial banks and savings institutions continued to pull back from the non-mortgage ABS market during the third quarter of 2015, according to a new Inside MBS & ABS analysis of call-report data. Banks and thrifts reported a combined $140.93 billion of non-mortgage ABS on their books at the end of September, down 5.3 percent from midyear. The decline marked the seventh consecutive decline in bank ABS holdings since they peaked at $175.54 billion at the end of 2013. Bank ABS investment tumbled 15.0 percent in the year since September 2014, hitting its lowest level since the end of 2011. The industry’s holdings were down in all ABS categories. In percentage terms, the sharpest downturn was in home-equity ABS, although this ...
Some investors won’t return to the non-agency MBS market until the federal government establishes minimum standards for issuers, according to Chris Katopis, executive director of the Association of Mortgage Investors. Speaking at the RMBS 3.0 symposium produced by Information Management Network and the Structured Finance Industry Group this month in New York, Katopis said investors are frustrated with the lack of action from the government to help the non-agency MBS market. “We know there’s a lot of work going on, but at some point the government has to set minimum standards,” he said.Katopis said investors are happy that SFIG is working on a new representation-and-warranty framework for non-agency MBS. However, the AMI is skeptical of voluntary industry standards. “Having ...
Two former officials at Standard & Poor’s called on the Securities and Exchange Commission to look for violations of new rules involving rating shopping. The SEC published a final rule with new requirements for rating services in August 2014. In a recent paper, Mark Adelson and David Jacob pushed the SEC to use the new rule to go after rating services that make adjustments to rating criteria in an effort to gain business, with a focus on the structured-finance market. Adelson and Jacob said such rating shopping by issuers has been “widespread” since the mid-1990s. Adelson was S&P’s chief credit officer from May 2008 until December 2011. He is currently the chief strategy officer of The BondFactor Company, which focuses ...
A handful of publicly traded real estate investment trusts have been quietly making inquiries about buying residential loans that do not meet the qualified mortgage standard, including subprime credits and even unsecured consumer loans, according to players on both sides of the equation. One executive who manages a REIT that plays in the jumbo market admitted as much in an interview with Inside MBS & ABS, but pointed to one major deterrent: the Consumer Financial Protection Bureau. “We’ve tried to get clarifications from them on such things as the ability-to-pay rule, but they haven’t been very helpful,” he said. The source noted that his REIT has so far avoided buying any nonprime, non-QM loans, saying he fears the regulator will ...
Residential mortgages serviced by banks in top foreclosure states are getting hit with higher loss severities than those serviced by nonbanks, largely because banks have so far dealt with more repercussions from regulatory settlements, according to Moody’s Investors Services. Moody’s compared major servicers’ subprime loss severities for loans in the top three foreclo-sure states of Florida, New York and New Jersey, which collectively make up about 42 percent of all subprime mortgages in foreclosure in non-agency RMBS. The rating service found that loss severities on bank-serviced mortgages in Florida averaged 95 percent, versus 81 percent for nonbank-serviced mortgages. Drilling down in the data a bit to review the extremes, on one end of the continuum for banks was CitiMortgage, which ...
Acting on a new policy that increases the focus on prosecuting individuals for corporate wrong-doing, the Department of Justice is reportedly planning to file criminal charges against executives at JPMorgan Chase and the Royal Bank of Scotland for the alleged pre-crisis sale of non-agency MBS to unsuspecting investors, the Wall Street Journal has reported. According to the report, the DOJ investigations were based on documents that allegedly suggested that shortly before the mortgage meltdown, executives at the two financial institutions securitized mortgages and sold them to investors knowing that the underlying loans were defective. The JPMorgan probe began after prosecutors uncovered crucial evidence from a related civil investigation in 2007: a memo from a bank employee cautioning senior executives about ...
Borrowers are increasingly changing the terms for loans backing recently issued commercial MBS shortly after the deal closes, said Fitch Ratings. The rating service said it has received about 15 requests this year for rating confirmations pertaining to loans from 2014 or 2015 vintage deals. While the majority of requests have been loan assumptions by new borrowing entities or ownership structures, a handful have contemplated more fundamental changes to other loan terms. But Fitch said the problem arises when some of the proposed changes would have required that the loan be modeled differently or more conservatively, had it known about the changes prior to issuance. The rating agency is especially concerned about borrowers trying to add more debt. “Additional debt, ...
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