Returns on non-agency structured finance products declined in the third quarter of 2015 compared with the previous quarter, according to industry analysts. The shift appears to be due to macro issues as opposed to declining underwriting or performance. “The third quarter wasn’t a particularly happy quarter for non-agencies, with brakes on issuance and pullback in returns,” analysts at Bank of America Merrill Lynch said in a new report. “The latter half of the third quarter was characterized...

Pizza, hamburgers and doughnuts have helped fuel a record year for whole-business securitization. The deals, which gained some popularity among investors before the financial crisis, are backed by franchise royalty and license payments. Late last week, Standard & Poor’s assigned a preliminary BBB+ rating to the planned $1.63 billion Domino’s Pizza Master Issuer LLC 2015-1. The whole-business securitization will be backed by franchise royalty and license payments, Domino’s intellectual property, and profits from distribution arrangements. Earlier this year, Dunkin Brands issued...

New issuance of residential MBS and non-mortgage ABS fell slightly during the third quarter of 2015, but the market remained well ahead of the pace set last year. A new Inside MBS & ABS analysis shows a total of $396.99 billion of MBS and ABS were issued during the third quarter, down 6.1 percent from the previous quarter. That total does not include commercial MBS or multifamily securities issued by Fannie Mae, Freddie Mac and Ginnie Mae. On a year-to-date basis, total MBS and ABS issuance was...[Includes two data tables]

Issuance of ABS backed by leases on small/mid-ticket equipment has rebounded since the financial crisis to levels last seen 15 years ago. However, industry participants suggest that loan-level disclosure requirements and mandatory risk-retention could limit activity in the sector going forward. At the recent ABS East conference produced by Information Management Network in Miami, Du Trieu, a senior director at Fitch Ratings, said issuance is increasing due to the improving economy and investor demand. “The collateral is business critical and income producing,” he added. Nearly $12.0 billion in small/mid-ticket ABS was issued...

Investors at the ABS East conference sponsored by Information Management Network last week in Miami largely agreed that many MBS and ABS sectors are stronger than they were before the crisis in terms of issuance and certainly in terms of performance. While the investor base for securities has declined from the boom times of 10 years ago, there are also fewer distressed sellers. “You tend to see that bonds are held in strong hands, which makes for a strong underpinning,” said Alessandro Pagani, a portfolio manager and head of securitized assets at Loomis Sayles. “It makes for a pretty good balance between supply and demand.” John Vibert, a managing director at Prudential Fixed Income, said...

The pricing disclosures mandated by the Financial Industry Regulatory Authority for ABS have had a mixed impact on the market, according to industry participants, with many claiming that the transparency has reduced liquidity. In June, FINRA started reporting post-trade price information for ABS via the Trade Reporting and Compliance Engine, better known as TRACE. The disclosures include the CUSIP, price and volume, all disclosed within 45 minutes after a trade is made. Actual volume is disclosed for trades below $10 million while trades above that amount are noted as “$10+ million.” The disclosures apply to publically-registered ABS along with deals in the private-placement 144A market. At the ABS East conference held by Information Management Network last week in Miami, Rishi Kapur, a managing director at Babson Capital, said...

“It’s amazing that we’re talking about this seven years after the financial crisis,” said Bob Behal, a principal and co-head of ABS/commercial MBS Investments at Vanguard Group, during this week’s ABS East conference in Miami. He was referring to the practice of rating shopping, which is a current practice, particularly in the commercial MBS market, according to a number of industry participants. A panel regarding reforms for the rating services and due diligence providers attracted a standing-room audience at the conference produced by Information Management Network. The conference was...

Commercial banks and savings institutions reduced their holdings of non-mortgage ABS again during the second quarter, according to a new Inside MBS & ABS analysis of call reports. Banks and thrifts held $147.55 billion of non-mortgage ABS as of the end of June, a 5.1 percent decline from the previous quarter. The banking industry’s aggregate ABS portfolio has been shrinking steadily since the end of 2013 and was down 15.2 percent over that period. Banks shed...[Includes two data tables]

Lenders and investment banks are working to increase the issuance of ABS backed by loans from marketplace lenders. Attracting investors to the new asset class has proved somewhat difficult, however, and a recent court decision has put the business model of some marketplace lenders in limbo. Howard Altarescu, a partner and co-head of the global finance business unit at the law firm of Orrick, Herrington & Sutcliffe, noted marketplace lending started with internet-based lending platforms, including Lending Club and Prosper Marketplace, that matched individual investors looking to lend small capital amounts to borrowers in need of consumer loans. He joined other experts during a webinar on the topic hosted this week by the Securities Industry and Financial Markets Association. Altarescu said...

The Securities and Exchange Commission has charged three MBS traders with fraud for inflating the prices of MBS they bought from and sold to investors. Former traders Ross Shapiro, Michael Gramins and Tyler Peters allegedly defrauded customers to illegally generate millions of dollars in revenue for their ex-employer, Nomura Holdings International. As senior traders with Nomura’s residential MBS desk since 2009, the brokers arranged trades between customers, meaning that each would buy MBS from one customer and resell them for profit to another customer. As head trader, Shapiro arranged MBS and manufactured housing ABS trades. According to the SEC, the traders’ illicit pricing took place...