Standard & Poor’s announced late last week that it placed 96 ratings from 20 servicer-advance ABS on watch for a potential downgrade and the rating service plans changes to its rating criteria for servicer-advance ABS. Industry analysts suggest that the actions could disrupt the market for servicer-advance ABS, as S&P has been the dominant rating service in the sector. S&P said downgrades on servicer-advance ABS are possible because the analysis that accompanied ratings on certain deals didn’t consider subordinated interest amounts as part of the ratable promise. “The CreditWatch placements reflect...

At the end of February, Ocwen Financial issued a $123.6 million security backed by mortgage-servicing rights on agency mortgages, the first of its kind. The security was attractive to investors as well as to nonbanks, with more transactions expected, according to the Urban Institute’s Housing Finance Policy Council. The transaction has a 14-year debt obligation and was secured by Ocwen-owned MSRs on mortgages with an unpaid principal balance of approximately $11.8 billion. Investors in Ocwen Asset Servicing Income Series 2014-1 receive a monthly payment of 21 basis points of the unpaid principal balance of the reference pool in the form of an interest-only strip, along with certain other payments. In a new analysis, the HFPC’s Laurie Goodman and Pamela Lee said...

The price of agency MBS has been rising since early April, which can only mean good things for publicly-traded real estate investment trusts that own the asset class. However, REIT share prices haven’t improved much of late, with some companies such as Annaly Capital Management continuing to trade closer to their 52-week lows than their highs. Late this week, for instance, Annaly – one of the largest MBS investing REITs – was trading at $11.30 compared to a 52-week high of $15.98 and a low of $9.66. But better days may be...

It’s only a matter of time before the remaining big bank defendants settle lawsuits filed by the Federal Housing Finance Agency over billions in non-agency mortgage-backed securities sold to Fannie Mae and Freddie Mac in the years leading up to the housing crisis, predicts a legal expert. Last week, Bank of America agreed to a $9.3 billion settlement that covers its own dealings as well as those of Countrywide Financial and Merrill Lynch, which it acquired in 2008. The agreement covers some $57 billion of MBS issued or underwritten by these firms.

New residential MBS issuance in the first three months of 2014 sank to the lowest quarterly volume since late in 2000, according to a new Inside MBS & ABS analysis. A total of $191.7 billion of residential MBS were issued in the first quarter of this year, down 25.5 percent from the fourth quarter of 2013. Compared to first quarter of 2013, new MBS issuance was down 59.2 percent. MBS production has been falling...[Includes two data charts]

The underwriting characteristics on the latest risk-sharing transaction from Freddie Mac have loosened somewhat compared with previous Structured Agency Credit Risk deals, prompting default expectations well above those projected for recently issued jumbo MBS. However, the government-sponsored enterprises’ risk-sharing transactions are still seen as good investments and investor demand has been strong. Freddie is preparing to sell a total of $966.0 million in three tranches to investors based on a reference pool with an unpaid principal balance of $28.15 billion. The deal priced this week. Freddie said more than 75 investors bought in and the deal was oversubscribed. The top tranche on STACR 2014-DN2 available for sale to investors is set...

Leading secondary-market representatives told the Financial Industry Regulatory Authority they generally support its goal of mitigating the counterparty credit risk borne by participants in the “to be announced” market and reducing the potential for systemic risk. But they are opposed to FINRA’s proposal to require maintenance margin to attain that aim – something the Treasury Market Practices Group has already considered and rejected. Issued back in January, FINRA’s proposed amendments stipulated that for bilateral transactions in covered agency securities with non-exempt accounts, FINRA members must collect, in addition to variation margin, maintenance margin equal to 2 percent of the market value of the securities. If sufficient margin is not collected, the member would have to deduct the uncollected amount from the member’s net capital at the close of business following the business day on which the deficiency was created. Additionally, if the deficiency in margin is not resolved...

Investors plan to increase their holdings in what are known as esoteric ABS – such as container, timeshare, whole business and franchise loans, structured settlements and solar and renewables – more so than consumer or commercial ABS, according to a new survey from the DBRS credit rating agency. Higher-yield opportunities are likely a key reason investors will look toward esoteric assets in a period of exceptionally low interest rates, the survey found. “Over the next 12 months, market participants are...[Includes two data charts]

Colony American Homes has come to market with a $513.6 million security backed by single-family rental homes, but some players in the space are starting to wonder if the returns on the bond will be anything special. Moody’s Investors Service and Kroll Bond Rating Agency rated the deal, which marks the second SFR securitization in four months. The other was a $479 million deal from Deutsche Bank and the Blackstone Group, which turned out to be oversubscribed. KBRA’s ratings on the Colony bond range...

Standard & Poor’s rated $11.72 billion of non-agency MBS issued in 2013, making it the most active rating service in the market by dollar volume, although DBRS rated considerably more deals, according to a new ranking and analysis by Inside MBS & ABS. In its heyday, S&P used to rate more than 90 percent of new issuance of non-agency MBS, but in 2013 it accounted for just 40.0 percent of the market by dollar volume. DBRS wasn’t too far behind with a 36.0 percent share, followed by Kroll Ratings and Fitch Ratings. Moody’s Investors Service rated...[Includes two data charts]