The disclosure rule recently issued by the Securities and Exchange Commission aims to reduce reliance on credit ratings in the structured finance market, an issue that federal regulators have long grappled with. The SEC’s Regulation AB took effect in 2006, and it included a requirement that publicly offered securities have an investment-grade rating. The so-called Reg AB2 finalized by the SEC in August eliminates the rating requirement and instead sets a number of new requirements for publicly issued deals. Beginning in November 2015, the CEO of the depositor of publicly issued...

The agency single-family MBS market posted its best quarter in a year as total issuance climbed to $267.33 billion during the third quarter of 2014, according to a new Inside MBS & ABS analysis and ranking. The combined MBS issuance of Fannie Mae, Freddie Mac and Ginnie Mae rose 6.6 percent from the second quarter of 2014, hitting its strongest level since the third quarter of last year. On a year-to-date basis, agency MBS remained 48.7 percent below the pace set in the first nine months of 2013. Even the long-suffering non-agency MBS market showed...[Includes two data charts]

“Rating shopping is alive and well,” Calvin Wong, chief credit officer at Morningstar Credit Ratings, said last week at the ABS East conference in Miami Beach. The Securities and Exchange Commission recently released a rule setting new requirements for the rating services, but Wong warned that the SEC hasn’t done enough to address the issue. He said...

Investors are comfortable with broad swaths of the structured finance market and issuers are cautiously optimistic that regulators won’t hinder activity too much going forward, according to attendees at the ABS East conference produced by Information Management Network this week in Miami Beach. “We’re in a pretty good spot right now in the market from a supply-demand perspective,” said Bob Behal, a principal and co-head of ABS investments and commercial MBS investments at Vanguard Group. Almost 3,700 people had registered by the start of the conference, up slightly from around 3,500 people in 2013. Will Zak, a director at Barclays, said...

Life for ABS investors got a little easier this week as Morningstar Credit Ratings put out its methodology for U.S. ABS ratings, outlining the principles the firm uses when evaluating, rating and monitoring financial, operating and corporate asset transactions. Morningstar’s analytical framework utilizes seven areas of analysis common to ABS transactions: legal structure, asset quality, transaction structure, credit support, cash flow analysis, originator and servicer quality, and counterparty risk. The analysis begins...

Moody’s Investors Service – which has been on the sidelines in the sputtering jumbo MBS market this year – has edged up to become the most active rating service in the non-mortgage ABS market, according to a new Inside MBS & ABS analysis. Moody’s rated 71 ABS over the first half of the year, deals with a total issuance volume of $66.15 billion. That represented 64.5 percent of total non-mortgage ABS issued in the first six months of 2014. Moody’s had its biggest market shares in vehicle finance ABS and student loan deals. Standard & Poor’s ranked...[Includes two data charts]

The recent adoption by the Securities and Exchange Commission of its Regulation AB II disclosure rule is expected to be a “credit positive” for the auto loan and lease ABS sector, but it probably will also raise costs for market participants and, ultimately, consumers, according to an industry consensus of the new rule. The new regulatory regime mandates standardized loan-level disclosures for ABS backed by auto loans and leases, as well as other classes, as reported previously. The loan-level data have to be provided on the SEC’s free online database known as the EDGAR system. Although specific data requirements vary by asset class, the new asset-level disclosures generally will include...

Commercial banks and thrifts reported a modest decline in their non-mortgage ABS investments during the second quarter of 2014, although several key sectors showed growth, according to a new analysis and ranking by Inside MBS & ABS. Bank call reports show that the industry held $171.2 billion of non-mortgage ABS in portfolio as of the end of June. That was down 0.8 percent from March, marking the second straight quarterly decline after bank ABS holdings hit a record $173.8 billion at the end of 2013. Bank holdings of auto loan ABS actually increased...[Includes one data chart]

Issuers of non-agency MBS and commercial MBS, among other structured finance asset classes, are set to face increased costs to comply with a rule from the Securities and Exchange Commission that increases disclosure requirements. But deals that are not issued publicly would avoid the increased costs. Last week, the SEC unanimously adopted a wide-ranging final rule known as Reg AB2, which was first proposed in 2010. By the beginning of 2017, newly issued, publicly registered non-agency MBS will have to include 270 loan-level data points disclosed via the SEC’s Electronic Data Gathering, Analysis, and Retrieval system, known as EDGAR. The required disclosures include...

A proposal from the National Credit Union Administration to permit covered credit unions to securitize loans they have originated – but not purchased – is widely seen as insufficient by the credit union industry because of that limitation. That’s likely to prompt the regulator to favorably revise the proposal in the coming months, industry analysts say. Back in June, the NCUA issued a proposal to authorize loan securitizations by credit unions, but only for loans originated, not purchased. It also proposed permitting the creation of special purpose vehicles (SPV) to hold the assets collateralizing the securities. Additionally, the proposal lists a number of minimum requirements and limitations on residuals and retained interests. The Credit Union National Association, in its comment letter to the agency, indicated...