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...

Some $800 million in servicer-advance ABS was issued by New Residential last week, helping to restart activity in the sector. New servicer-advance ABS issuance had stalled due to issues with ratings from Standard & Poor’s, the predominant rating service in the market. The two deals concurrently issued by New Residential followed a $225 million issuance by Ocwen Financial at the end of June. The firms helped end a year-plus long break in the issuance of rated servicer-advance ABS. In April 2014, S&P placed...

Federal regulators have implemented a number of rules in recent years aimed at moving banks away from a reliance on credit ratings when making investing decisions. Officials at the Federal Deposit Insurance Corp. stress that if a bank’s management doesn’t have comprehensive understanding regarding a security, the bank shouldn’t invest in the MBS or ABS. “The gist of these new requirements is simple: banks should understand the risks associated with the securities they buy and should have reasonable assurance of receiving scheduled payments of principal and interest,” said Robert Hendricks, capital markets policy analyst at the FDIC. In an FDIC report, Hendricks provided...

Standard & Poor’s ranked as the most active rating service in the non-mortgage ABS market at the midway mark in 2015, but came in last in the non-agency MBS sector. S&P provided ratings on $63.55 billion of non-mortgage ABS issued during the first half of the year, or 60.3 percent of total issuance. That was off slightly from its 64.1 percent market share for all of last year. The company has gotten more active in rating credit card deals, but has lost some of its share in vehicle finance and business loan ABS. Fitch was...[Includes two data tables]

The trajectory of delinquencies for U.S. timeshare ABS is continuing its downward trend, and issuance is expected to be near or perhaps even exceed last year’s level, with solid prospects for continued stable growth throughout the rest of the year, according to a consensus of industry analysts. U.S. timeshare ABS delinquencies fell again in the second quarter of 2015 to their lowest level in eight years, the latest index results from Fitch Ratings show. Total delinquencies for the second quarter were 2.66 percent, down from 2.79 percent in the first quarter and 2.92 percent a year ago. The ratings service has seen...