Moodys Investors Service was the most active rating service in the growing non-mortgage ABS market during the first half of 2012, but a new Inside MBS & ABS analysis shows that the company followed a somewhat unusual path to get there. Auto loan ABS has been the dominant sector in the market this year, accounting for 47.3 percent of new issuance through the first six months of 2012. But Moodys share of auto ABS ratings has slipped from 79.0 percent in 2011 to 77.2 percent this year although thats still higher than any of its competitors. Moodys also boosted its share of business loan ABS ratings, a large number of which are vehicle dealer floorplan transactions. Credit card ABS have made...[Includes two data charts]
Faced with a deadline it was unable to meet, the Securities and Exchange Commission this week published interpretive guidance regarding references in federal regulations to MBS ratings. The Dodd-Frank Act mandated that such references be changed by July 20, but the SECs guidance will keep the references intact until the agency and others can establish new standards of creditworthiness. The DFA strikes references to credit ratings from nationally recognized statistical rating organizations in federal regulations and inserts new text that provides that in order to satisfy these definitions a security must meet standards of credit-worthiness established by the SEC. The SEC said it was unable...
Moodys Investors Service proposed a significant overhaul to ratings for non-agency MBS servicers late last week. Among other new metrics, the rating service is planning to incorporate performance data from mortgages serviced for the government-sponsored enterprises. Currently, servicers submit loan-level portfolio data to Moodys as part of the rating services servicer quality assessments. The data would be augmented with data from securitization trusts, which is available more quickly, as well as GSE performance data as needed. Data from securitization trusts will receive...
Nationstar Mortgage LLC last week finalized its acquisition of more than $63.7 billion worth of servicing assets from Aurora Bank.Aurora Bank, a subsidiary of Lehman Brothers, has been carved up to repay creditors of the bankrupt Wall Street firm that was a major player in the non-agency MBS market. Ocwen Financial had earlier purchased $1.8 billion in commercial servicing rights from Aurora. The Aurora mortgage servicing portfolio is comprised of 75 percent non-conforming loans in non-agency MBS and 25 percent conforming loans in Fannie Mae and Freddie Mac pools, according to...
A subsidiary of Credit Suisse Group issued its second non-agency jumbo mortgage-backed security of the year last week. The transaction was backed by $425.09 million of jumbo mortgages, largely originated by MetLife Home Loans, which ceased originations at the beginning of this year. The privately-placed deal CSMC Trust 2012-CIM2 received AAA ratings from Standard & Poors and DBRS with credit enhancement of 8.25 percent on the AAA tranche. S&P also placed a AAA rating on CSMC Trust 2012-CIM1, the $741.94 million ...
The Securities and Exchange Commission is coming down the home stretch in a project that has raised jitters in the MBS and ABS market: a review of the credit rating process for structured finance transactions that will conclude with reform recommendations for Congress. Embedded in the Dodd-Frank Act was a provision authored by Sen. Al Franken, D-MN, that requires the SEC to study potential conflicts of interest in issuer-pay and subscriber-pay compensation models used in the credit rating process. Franken originally proposed that the SEC be required to create a process through which a new government entity would assign...
The Office of the Comptroller of the Currency has finalized a rule replacing certain credit rating references with alternative standards of credit worthiness to help banks determine whether a security is investment grade. Published in the June 13 Federal Register, the final rule is identical to the rule proposed by the OCC in November 2011 to implement directives in the Dodd-Frank Act to prevent over-reliance on credit ratings. Congress partly blamed inflated credit ratings for the financial crisis when triple A-rated mortgage securities lost their value as interest rates rose and home values...
The field of firms looking to place ratings on non-agency mortgage-backed securities got a little more crowded last week. Morningstar Credit Ratings released its non-agency MBS rating guidelines with criteria similar to the five firms that have placed ratings on non-agency securities in recent years. Morningstar said it will provide timely, unbiased and transparent ratings on both new-issue and seasoned non-agency MBS. Securities will have to be able to withstand a catastrophic event to receive ...
The booming market for rental housing and efforts to resolve the massive foreclosure inventories of Fannie Mae, Freddie Mac and the FHA has sparked investor interest in single-family rental securitization, according to credit rating agencies. Credit rating agencies have begun looking at real estate owned conversions to rental properties and the potential for securitizing cash flows from REO-to-rent securitizations. Based on initial assessments, the rating services see a promising, emerging asset class. REO-to-rent securitizations could take a number of forms, any of which can offer advantages to...
In an effort to standardize its commercial mortgage-backed security rating criteria, Standard & Poors plans to establish a single, all-around framework for rating U.S. and Canadian CMBS transactions. The credit rating agency is seeking comment on proposed criteria for structuring a new CMBS rating framework, which would be used to evaluate stand-alone, large loan and conduit/fusion CMBS transactions. Based on a representative sample of CMBS deals, a modest, limited impact on ratings may be expected on 25 percent of rated CMBS tranches, S&P said. The proposed criteria generally assume a...