A transparency feature included in the Dodd-Frank Act aimed at helping MBS and ABS investors understand the representations and warranties on a transaction has created a significant amount of work for rating services with little benefit for investors, according to officials at ratings firms. Since June 2015, rating services have been required by the DFA to compare the reps and warrants on a transaction they’re rating with a benchmark set of reps and warrants for that asset class. These 17g-7 reports often span hundreds of pages, detailing similarities and differences between the reps and warrants on a specific transaction compared with a set of benchmarks established by the rating services. Claire Mezzanotte, a group managing director and head of global structured finance at DBRS, said...

MBS are likely to be hurt when the Federal Reserve stops its reinvestments to shrink its balance sheet over the next few years, according to an analysis by Desjardins, Canada’s largest cooperative financial group. Even though the agency plans to withdraw gradually, its $1.75 trillion in MBS holdings account for approximately 20 percent of all U.S. MBS outstanding, noted Mathieu D’Anjou, senior economist with the Desjardins Group. “An increase in rate spreads between MBS and U.S. bonds, [which is] currently low, could be required...

Online consumer lender Prosper Marketplace, based in San Francisco, recently finalized a deal with a consortium of institutional investors to purchase as much as $5 billion of the lending platform’s unsecured consumer loans during the next two years. The consortium comprises investment bank Jefferies Group LLC and three asset managers: affiliates of New Residential Investment Corp., Third Point LLC, and an unnamed entity of which Soros Fund Management LLC serves as principal investment manager. Under the terms of the deal, the consortium will earn...

Ginnie Mae production fell substantially in February from January as the government-insured lending market continued to lose steam in the first quarter of 2017. Ginnie mortgage-backed securities issuance fell 24.0 percent from January as fewer purchase and refinance loans were pooled for securitization, bringing February’s total issuance to just $32.2 billion. Year-over-year Ginnie MBS issuance, on the other hand, increased by 6.2 percent. The government-insured market set an all-time record of $545.0 billion in originations during 2016, a whopping 31.0 percent jump from the previous year. That total eclipsed previous records for originations of FHA, VA and rural housing loans guaranteed by the U.S. Department of Agriculture, according to data compiled by affiliate Inside Mortgage Finance. In addition, government-insured lending accounted for a record ... [ 3 charts ]

The SFIG Vegas conference this week set another attendance record for the annual event, demonstrating strong interest in the structured finance market. While investors are comfortable with most asset classes of MBS and ABS, significant concerns remain about non-agency MBS. More than 6,700 people registered for the conference, according to Jade Friedensohn, director of programming at Information Management Network, which produced the conference along with the Structured Finance Industry Group. Potential investors in non-agency MBS continued...

The two major players in the jumbo mortgage-backed security market have seen strong demand for their issuance in recent months. But much broader factors are likely to limit issuance, including ongoing uncertainty regarding reform of the government-sponsored enterprises. Marc Simpson, an executive director at JPMorgan Securities, said 50 investors bought into the bank’s latest jumbo MBS, a $1.03 billion issuance. He said it was a “highwater mark,” as 20 to 30 investors typically ...

Documents have been drawn up to define a deal agent’s responsibilities, a number of firms are willing to be deal agents for new non-agency mortgage-backed securities and some investors insist that the investor-friendly role is necessary. But a deal agent has yet to be included in an MBS. Dmitri Rabin, a vice president of Loomis, Sayles & Company, an investing firm that has pushed the deal-agent concept, conceded that the function doesn’t provide much value in the current environment ...

By creating liquidity in Ginnie Mae mortgage-backed securities, liquidity coverage ratio (LCR) policies have attracted lenders – mostly nonbanks – whose funding relies more on securitizations – toward FHA loan originations, according to a new paper published by academicians. The paper, “Nonbanks and Lending Standards in Mortgage Markets: The Spillovers from Liquidity Regulation,” maintains that such lenders approve more FHA loans because they can sell the loans easily, given the high liquidity of the securitized product. The greater liquidity in Ginnie MBS has resulted in higher market share and eased standards especially for nonbanks and lenders with less deposit funding. It also has led to tighter standards for conventional mortgages, which are eligible for government sponsored enterprise securitization, wrote Pedro Gete and Michael Reher, researchers in the ...

The retained mortgage investments of Fannie Mae and Freddie Mac declined by 17.5 percent over the course of 2016, keeping the two government-sponsored enterprises on track to meet targets set as conditions of their conservatorships. The two GSEs reported a combined $570.78 billion in retained mortgage investments at yearend, down 7.3 percent from September. The biggest decline was in their holdings of MBS, which fell 23.8 percent for the year. Back in the early 2000s, Fannie and Freddie were...[Includes one data table]

Securities investors will soon be able to have a taste of the revenues generated by Long Island iced teas and Jack Daniel’s glazed chicken strips as TGI Friday’s is set to issue a $450.0 million whole-business securitization. The planned TGIF Funding LLC Series 2017-1 received ratings from Kroll Bond Rating Agency and S&P Global Ratings this month. KBRA assigned BBB ratings to both tranches of the security while S&P assigned BBB- ratings. The deal follows...