The Fed is taking steps to boost the market for agency MBS and certain sectors of the ABS market, while non-agency MBS isn't receiving direct relief. The Structured Finance Association called for an expansion of the new TALF.
Issuance of non-agency MBS and ABS is still being completed, but at a slower pace. Spreads have widened for new deals along with trading in the secondary market.
A longer statute of limitation and increased disclosure requirements could help attract long-term investors in the MBS and ABS market, industry experts recommend.
The SEC’s Office of Credit Ratings is exploring how it can address conflicts of interest in ratings of MBS and ABS. An increase in performance-related disclosures and boosting unsolicited ratings are being considered.
The biggest asset categories, consumer finance and credit cards, saw declines in bank investment during the fourth quarter, but the industry added ABS backed by auto loans, business finance notes and leases.
Alternative data, machine learning, blockchain and document digitalization in securitization deals have the potential to improve credit quality, but they are untested and come with risks, says Moody’s.
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