Moody’s Investors Service this week warned of increasing complexity in the structures of new jumbo MBS. However, losses on the deals will only occur in “low probability scenarios” and issuers have yet to bring back all of the non-agency MBS features seen before the financial crisis. Moody’s said complex cash-flow structures in new jumbo MBS can increase risks on senior bonds in the event of high mortgage losses. The features include super-senior support bonds, exchangeable securities, principal-only bonds, and pool interest-only bonds. “These securities pose...

Rates for non-agency MBS and consumer ABS are expected to trend lower after the Federal Open Market Committee pulled a fast one on Wall Street this week by contradicting an expected “tapering” of its asset purchase program. Instead, the nation’s central bank announced it was continuing its ongoing purchases of $40 billion worth of agency MBS per month and $45 billion in longer-term Treasury securities. Prior to the FOMC’s meeting this week, the consensus view was that the Federal Reserve would pare monthly purchases of Treasury bonds by $10 billion and agency MBS by $5 billion beginning in October, according to analyst Isaac Boltansky at Compass Point Research & Trading LLC. “The housing sector has been...

Commercial banks and savings institutions held $165.8 billion of non-mortgage ABS in their portfolios as of the end of June, according to a new Inside MBS & ABS analysis of call report data. Second-quarter ABS holdings were up just 1.3 percent from the end of March, but it was enough of a gain to establish a new record for the industry. Compared to a year ago, bank and thrift ABS holdings were up 4.6 percent. The aggregate portfolio was...[Includes one data chart]

Home Loan Servicing Solutions is preparing to issue a $350 million servicer advance receivable ABS, according to a presale report issued late last week by Standard & Poor’s. With the deal, $5.3 billion in mortgage servicer advance ABS will have been issued this year, according to the rating service. S&P has been the dominant rating agency in servicer advance ABS. Erkan Erturk, senior director of global structured finance research at the rating service, said issuance of servicer advance ABS is on track to reach the $7.0 billion in issuance S&P predicted at the beginning of the year. HLSS Servicer Advance Receivables Trust Series 2013-T6 received...

Revised risk-retention requirements proposed last week by federal regulators for certain non-mortgage ABS and commercial MBS are somewhat looser than the standards initially proposed in 2011. Perhaps most significantly, “blended pools” would be allowed for commercial mortgages, commercial real estate loans and auto loans, allowing issuers to mix qualifying loans and non-qualifying loans in the same security. Securitized loans that don’t meet qualifying underwriting standards will be subject to the 5 percent risk retention as required by the Dodd-Frank Act. Blended pools would be eligible for reduced risk retention, as low as 2.5 percent. “The agencies believe...

Standard & Poor’s is defending its status as the top rating service in the non-agency MBS market through the first half of 2013, having put its stamp on 39.0 percent of the growing market, according to a new Inside MBS & ABS ranking. S&P has been the top non-agency MBS rating agency over the years but saw DBRS capture the title in 2012 with 54.8 percent of rated transactions. The non-agency ratings business has become significantly more fragmented than it was before the financial collapse, when S&P often rated more than 90.0 percent of the deals that came to market. Both Fitch and Kroll Ratings are...[Includes two data charts]

Rising interest rates and increased volatility helped slow new issuance of non-mortgage ABS during the second quarter of 2013, with declines posted in most asset classes. A total of $38.96 billion of non-mortgage ABS were issued during the second quarter, down 17.3 percent from the first three months of the year, according to a new Inside MBS & ABS ranking and analysis. At the midway point in 2013, ABS issuance was off 3.7 percent from the first six months of last year, which included heavy volume in the second quarter of 2012. Even with the second-quarter softening, ABS issuance in 2013 is...[Includes two data charts]

Federal regulators will make their next move on risk retention and defining qualified residential mortgages in September, according to the Federal Reserve. Meanwhile, the Securities and Exchange Commission is working on a number of long-pending MBS rules, including the so-called Reg AB2. The Fed expects to take “further action” on risk retention in September, according to its latest regulatory agenda. The SEC, which is jointly working on the risk-retention rule with the Fed and other agencies, was vague, stating that the next action date was “undetermined.” Regulators have received...

The Financial Industry Regulatory Authority will begin disseminating information for so-called specified-pool MBS issued by Fannie Mae, Freddie Mac and Ginnie Mae, as well as securities backed by loans with Small Business Administration guarantees. The move is aimed at increasing transparency in specified pools, which represent an estimated 3,500 trades, totaling $18 billion in par value, on an average daily basis. It follows a similar effort by FINRA last year in the to-be-announced market for agency MBS. Transaction data will be circulated...

The audience for the marketing of private-placement securities is set to increase due to changes approved last week by the Securities and Exchange Commission. Separately, the Financial Industry Regulatory Authority voted to increase transparency for consumer ABS private placements, prompting some to suggest that FINRA could also increase transparency for private-placement non-agency MBS. The SEC voted 4-1 to adopt a new rule to implement a JOBS Act requirement to lift the ban on general solicitation or general advertising for certain private securities offerings offered under Rule 506. The SEC also amended Rule 144A, which covers private placements of non-agency MBS and other securities. Under the new rule, offers of 144A securities can be made...