The top three rating services continued to dominate the new issuance market in non-mortgage ABS during the first nine months of 2012, according to a new Inside MBS & ABS analysis, but the biggest player in the non-agency MBS market was DBRS. Moodys Investors Service rated 69.7 percent of the non-mortgage ABS issued in 2012 as of the end of the third quarter, down slightly from its 70.4 percent share of the 2011 market. The companys strengths were in vehicle finance and business loan ABS, where it captured more than three-quarters of new issuance by dollar volume. Standard & Poors ranked...[Includes two data charts]
Securitization market professionals are jointly promoting the practice of margining transactions involving Fannie Mae, Freddie Mac and Ginnie Mae MBS, despite the costs involved, to reduce counterparty and systemic risks. Last week, the Treasury Market Practices Group revised its existing best practices for Treasury, agency debt and agency MBS markets to include a recommendation that forward-settling agency MBS transactions be margined in order to prudently manage counterparty exposures. In order to allow market participants to develop...
Investors in non-agency MBS raised concerns about principal forgiveness required by the $25 billion national servicing settlement agreed to earlier this year by five banks. While most of the banks claimed they would focus the efforts on their own portfolio holdings, MBS investor concerns appeared to have been realized as Bank of America said about half of the principal it has forgiven was tied to mortgages in non-agency MBS. However, Shaun Donovan, secretary of the Department of Housing and Urban Development, noted this week that investors in Bank of Americas non-agency MBS agreed to allow principal reductions on their holdings. We knew from the beginning, that because Bank of America had...
Ginnie Mae is in sound financial health and poised to potentially absorb any FHA losses, if required, but the enduring fallout from Taylor, Bean & Whitakers collapse three years ago continues to plague the agency, according to an independent audit commissioned by the Department of Housing and Urban Development Inspector General. The report by CliftonLarsonAllen disclosed no material weaknesses in Ginnies internal controls over financial reporting and no instance of legal or regulatory noncompliance during fiscal years 2012 and 2011. Ginnies loss reserves for its MBS program declined to $357.4 million in fiscal 2012, from $395.8 million at the end of fiscal 2011. Ginnie Mae believes...
The latest planned non-agency jumbo MBS from Redwood Trust will have lower credit enhancement levels than other recent deals issued by the real estate investment trust, according to presale reports released this week. The AAA tranche on Redwoods sixth non-agency MBS issuance of the year will have credit enhancement of 7.05 percent, down from 7.30 percent on the three previous deals issued by Redwood. Officials at Redwood along with others interested in non-agency MBS have suggested that credit enhancement levels required by the rating services have been too high. The credit enhancement for Sequoia Mortgage Trust 2012-6 will be the lowest on a non-agency MBS backed by new loans since the MBS issued by Redwood in 2010 had 6.50 percent credit enhancement on the AAA tranche. Fitch Ratings, Kroll Bond Rating Agency and Moodys Investors Service are set...
Participants in collateralized loan obligation deals remain optimistic about the future of the market although they caution that macroeconomic issues might still derail the products slow return. In a panel discussion hosted by Standard & Poors last week, CLO market executives maintained a positive outlook for CLO performance as the market experienced a resurgence early this year. The market collapsed after the financial crisis but has apparently been resuscitated by investors hungry for high-risk, high-return securities. CLOs acquire...
Delinquencies on non-agency MBS will likely increase temporarily due to Hurricane Sandy, according to industry analysts, but long-term losses due to the storm are expected to be minimal. Insurance will play a key factor in overall losses, and estimates vary significantly on the extent of coverage in the affected areas. Moodys Investors Service projected this week that non-agency MBS are unlikely to suffer material losses due to Sandy even though the affiliated Moodys Analytics estimated the damage to residential housing from the storm will hit $10.5 billion. Even if damages exceed...
Fannie Mae and Freddie Mac continued to trim their retained holdings of MBS and unsecuritized mortgages during the third quarter, but at a slower pace than in previous periods, according to an analysis by Inside MBS & ABS of earnings reports released this week by the two government-sponsored enterprises. One of the conditions of the conservatorships the GSEs entered four years ago was that they would reduce their retained mortgage portfolios by 10 percent a year. Those terms were revised in August to include a 15 percent annual wind-down, which would take each GSEs investment portfolio down to $250 billion by the beginning of 2018, four years sooner than under the previous arrangement. As Freddie noted...[Includes one data chart]
The ACLU is calling for changes to federal anti-discrimination statutes to deter secondary mortgage market participants from engaging in business practices that might have a discriminatory impact on certain protected classes of borrowers. In a recent analysis of mortgage foreclosures, the ACLU said the origination and securitization of subprime and other high-risk mortgage products have hurt minority families and caused the loss of 3.5 million homes to foreclosure. The ACLU believes...
The Securities and Exchange Commission has been quietly meeting with investors in non-agency mortgage-backed securities looking for leads to bring regulatory actions. Reaction from investors to the SECs outreach has been decidedly mixed, though Reid Muoio, a deputy for the SECs structured and new products unit, said the SEC is working to improve regulation on behalf of investors. Speaking at the recent ABS East conference sponsored by Information Management Network in Miami, Muoio detailed an SEC outreach program that was apparently previously undisclosed. He said that a ...