A new report from Fitch Ratings finds that risk appetite is returning to the U.S. triparty repo market, thanks in part to deeply discounted collateral, much of which is in the form of Alt A and subprime residential MBS and collateralized debt obligations. Fitch’s study of the market is based on repo transaction information drawn from a sample of the 10 largest U.S. prime money market funds’ financial statements. Fitch’s sample encompasses about $90 billion in repo transactions as of the end of August 2011, which represents slightly more than 5 percent of the $1.6 trillion U.S. triparty repo market...

The Federal Reserve Bank of New York ended a week of speculation in the non-agency MBS market with the sale, through competitive bidding, of $6.2 billion of MBS linked to the taxpayer bail-out of mega-insurer AIG. The winning bid came from Goldman Sachs, one of five firms the Fed invited to submit bids on the multibillion-dollar Maiden Lane II (ML II) portfolio of subprime MBS held by the agency. The other bidders included the securities arms of Morgan Stanley, Royal Bank of Scotland, Barclays and Credit Suisse. This week’s transaction followed a $7.0 billion MBS sale on Jan. 19 to Credit Suisse from the same...

Moody’s Investor Services ranked as the most active rating service in the non-mortgage ABS market last year, but finished 2011, as the least involved in non-agency MBS activity, according to a new Inside MBS & ABS ranking and analysis. Moody’s rated a total of $89.3 billion of non-mortgage ABS last year, or 70.4 percent of total issuance. That was up from a 53.7 percent share in 2010, when Moody’s rated some $58.9 billion and finished second to Standard & Poor’s. Moody’s strengths in 2011 were in the credit card, vehicle finance and business loan sectors, capturing over 70.0 percent of each of those...

A week after federal and state enforcement agencies launched a residential MBS investigative effort, reports have surfaced that Ally Financial, Bank of America, Citigroup, Deutsche Bank and Goldman Sachs are about to be sued by the Securities and Exchange Commission for allegedly misrepresenting the quality of mortgages they packaged and sold to investors. Officials at the SEC, which never confirms specific Wells Notices of impending legal action, declined to comment on the investigation, as did spokesmen for Ally, Citi and Goldman. Representatives from Bank of America and Deutsche Bank did not...

Both the Federal Housing Finance Agency and Freddie Mac are refuting a published report suggesting that a mortgage finance vehicle at one time employed by the government-sponsored enterprise was designed to profit the company by preventing homeowners from refinancing. An article published this week by ProPublica and National Public Radio contended that Freddie stood to profit from hedging investments known as inverse floaters that would pay higher returns if interest rates rose and more homeowners remained in mortgages with high interest rates. According to ProPublica, Freddie purchased inverse floaters...

Federal and state enforcement agencies late last week launched a broad new initiative to investigate and develop litigation on fraud and misconduct in the non-agency MBS market, issuing civil subpoenas to 11 financial companies. The RMBS Working Group is being co-chaired by five officials: two assistant attorneys general in the Justice Department, the head of enforcement at the Securities and Exchange Commission and state attorneys general from New York and Colorado. Some 55 DOJ officials are participating, including 15 attorneys and 10 Federal Bureau of Investigation agents, with 30 more attorneys...

New regulations are re-shaping the non-agency MBS market, but economic issues, the ratings process and shifting investor appetite may have more to do with the stalled recovery in the sector, experts said during the American Securitization Forum conference last week in Las Vegas. John Arnholz, a partner at Bingham McCutchen LLP, suggested that the regulators will end up issuing a new proposed rule on risk retention, given the widespread opposition to the original proposal. The proposed premium capture recovery fund idea “came out of nowhere,” he said, adding that there is a good deal of dissent among the six...

While a major regulatory concern of the past few years – the risk-retention rule – has yet to be resolved, the industry is squaring its shoulders for new challenges: the so-called Volcker Rule, a proposal on conflicts of interest in securitization and new bank capital requirements regarding market risk. These projects could do “enormous or irreparable damage to the industry, and entire sectors of the industry could be lopped off,” said Tom Deutsch, executive director of the American Securitization Forum, during the ASF conference last week in Las Vegas. Only about one eighth of the regulatory requirements...

The Obama administration late last week announced that it is extending its Home Affordable Modification Program for another year and sweetening the inducements to get investors to agree to principal reduction loan mods. MBS analysts generally grade the changes as a positive for the non-agency MBS market, but the impact on Fannie Mae and Freddie Mac securities may depend on whether the government-sponsored enterprises agree to principal reductions. The revised HAMP program will now be available for investor-owned mortgages, and it will feature a revised debt-to-income calculation taking into...

Issuance of new non-agency mortgage-backed securities will resume when the financing structure is economical, according to attendees at the American Securitization Forum’s ASF 2012 conference last week in Las Vegas. Just what it will take to make non-agency securitization economical remains to be seen, though some suggest that regulatory uncertainty plays a major factor. “We have not seen much of a test of the non-agency market because it’s not economical,” said Peter Sack, a managing director and co-head of real estate and mortgage finance at Credit Suisse. “The bank portfolio bid is strong.” ...