The equipment-backed ABS sector will likely have another good year this year, and investor interest remains strong, according to a senior analyst at the DBRS credit rating service. “For the equipment finance industry in 2014, we are moderately optimistic,” Chuck Weilamann, senior vice president at DBRS, said during a teleconference last week. “We’ve certainly seen delinquencies and charge-offs hit lows, with a five-year low achieved in 2013.” Not surprisingly, DBRS made...

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...

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...

The cost of borrowing for many homebuyers could rise as a consequence of the Senate’s newest housing finance reform legislation if it’s enacted as is, according to an analysis by Barclays. The bill, filed last week by Sens. Tim Johnson, D-SD, and Mike Crapo, R-ID, would replace Fannie Mae and Freddie Mac with a new mortgage-backed securities program for conventional mortgages that requires private investors to take the first 10 percent of losses. The Barclays analysis found...

The Federal Open Market Committee this week voted to scale back the central bank’s purchases of agency MBS again, dropping the monthly growth target to $25 billion, but the deceleration is barely keeping even with the rapid slowdown in new MBS issuance. At its December meeting, the FOMC decided to drop its MBS purchases to a pace that would add $35 billion per month, and lowered that by another $5 billion at its January meeting. The program began in late 2012 at $40 billion a month. The central bank will continue to reinvest principal and interest payments on its holdings in the agency MBS market. The most recent available data show...[Includes two data charts]

New Federal Reserve Chair Janet Yellen said this week that the U.S. central bank’s bond purchase program will likely end this fall as the Fed Open Market Committee announced, as expected, a further pullback in its agency MBS purchases. Beginning in April, the FOMC said it will add to its agency MBS holdings at a pace of $25 billion per month rather than $30 billion per month. If the slowdown continues at its current pace, the Fed will stop growing its MBS holdings late this summer. The FOMC also updated...