ARRC publishes details on how MBS and ABS linked to LIBOR can transition to a different reference rate. The fallback language applies to newly-issued deals.
Performance of the subprime auto ABS market is expected to decline, which likely will prompt higher credit-enhancement requirements from rating services.
Investors and issuers are divided on the usefulness of disclosure requirements for MBS and ABS. While investors said disclosures encourage them to buy securities, issuers cited them as a burden.
Morningstar plans to buy fellow rating agency DBRS for $669 million. Currently, there are 10 nationally recognized statistical rating organizations, and speculation is the space could be ripe for consolidation.
Fitch Ratings called out other rating services for allowing credit enhancement levels that it views as inadequate on ABS from marketplace lenders. Other rating services are seen as getting more comfortable with the sector.
S&P's proposal to loosen rating standards for CLOs was criticized by a former chief credit officer of the rating service. Annual issuance of CLOs increased by 9% in 2018 to $129 billion, with analysts warning of performance issues.
The transition away from the London Inter-bank Offered Rate could prompt significant tax issues for MBS and ABS investors. The Structured Finance Industry Group wrote to the Internal Revenue Service and Treasury last week requesting guidance on the issue. LIBOR won’t be available after 2021 and market participants are looking for an alternative reference rate. Various securities are tied to the London benchmark rate in terms of the loans that back the deals and their ...
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