An affiliate of Nationstar Mortgage is preparing to issue an ABS backed by servicer advances and deferred servicing fee receivables, continuing a trend of nonbank servicers fueling their growth via securitization. Industry analysts suggest that the deals offer good returns to investors, even with regulators increasing their scrutiny of nonbanks. The $1.96 billion servicer advance ABS from New Residential Investment is expected to close on March 18, according to a presale report by Standard & Poor’s. The deal is set to receive a AAA rating from the rating service. “Based on the nature of the assets which historically display high recovery typically at the top of the waterfall, we would view...

Fannie Mae and Freddie Mac sold some nonprime mortgage-backed securities during 2013 even though the government-sponsored enterprises have seen strong returns on these holdings in recent quarters. The GSEs held a total of $84.61 billion in nonprime MBS as of the end of 2013, according to a new analysis by Inside Nonconforming Markets. The holdings declined by 18.2 percent compared with the end of 2012 due to a combination of ... [Includes one data chart]

A coalition of California municipalities is preparing to issue a $104.40 million ABS backed by proceeds from Property Assessed Clean Energy assessments. The Federal Housing Finance Agency has raised concerns about PACE loans, but industry analysts suggest that the FHFA doesn’t pose much of a risk to the planned ABS, even though a significant portion of the PACE loans in the deal are on properties with mortgages backed by Fannie Mae and Freddie Mac. Kroll Bond Rating Agency said 31 states have passed legislation allowing municipalities to create PACE programs. The programs allow local governments to finance renewable energy and energy efficiency projects on privately-owned properties. The Home Energy Renovation Opportunity program is a PACE program that helps finance energy-efficient upgrades and improvements such as solar, heating, ventilation and air conditioning, windows, roofing and water-saving products. HERO Funding Class A Notes, Series 2014-1, is set...

The Securities and Exchange Commission was set to vote on a final rule earlier this month that would set new disclosure requirements for non-agency MBS, but the agency is still considering how the final rule should be applied as industry participants clamor for further changes. The SEC this week re-opened the comment period regarding the pending requirements for disclosures on MBS and ABS, the so-called Reg. AB2 rule. The rule was first proposed in 2010 and re-proposed in 2011. The comment period on the second proposal closed...

Kara Stein, a commissioner at the Securities and Exchange Commission, said the SEC needs to take action regarding the rating services. It was one of many recent MBS-related calls for action directed at the SEC, from the agency's leadership, Congress and industry analysts. "We need to finally and firmly address the conflicts of interest in asset-backed securitizations and the provision of credit ratings," Stein said in a speech late last week. She noted...

The private student-loan sector continues to slowly improve, but defaults and delinquencies are still at elevated levels compared to the period before the financial crisis, according to a new report by analysts at DBRS, based on data from deals that closed between 2002 and 2007. Quarterly gross defaults, as measured as a percentage of loans in repayment, slipped from 1.07 percent in the third quarter of 2013 to 1.00 percent in the fourth quarter. Similarly, the percentage of gross defaults as a percentage of the original pool balance declined from 0.55 percent to 0.50 percent. “Defaults have remained...

The Federal Reserve’s move to reduce its purchases of agency mortgage-backed securities may eventually change the relative costs and benefits of financing new production through Fannie Mae, Freddie Mac and Ginnie Mae. “We’re in an environment where I think banks are going to get interested in at least the more attractive credit risks and holding those in portfolio,” said Mark Calabria, director of financial regulation studies at the libertarian Cato Institute in Washington, DC. “So, to me, the most important question going forward over the next two years for the MBS market is how much of this [new production] is going to make its way into MBS and how much will be held on balance sheets as whole loans.” Calabria predicted...

Wall Street generated $165.66 billion of new non-mortgage ABS during 2013, a sturdy 12.7 percent increase over the previous year and the best annual production volume since 2008, according to a new analysis and ranking by Inside MBS & ABS. ABS issuance fell off in the fourth quarter of 2013, dropping 10.4 percent from the third quarter, as all the major asset classes saw slowing volume. The $37.82 billion of new ABS generated in the final three months of 2013 was slightly below the second quarter, but it was above the level set in the third and fourth quarters of 2012. Vehicle-finance ABS turned in...[Includes two data charts]

A number of structured-finance products outside of new non-agency MBS rebounded from the financial crisis, offering stronger returns than new non-agency MBS, and often with less risk. Among the myriad of products investors at the ABS Vegas conference last week said they prefer to new non-agency MBS were collateralized-debt obligations backed by trust-preferred securities, collateralized-loan obligations, commercial MBS, rail car ABS and container ABS. “There’s...

The consensus among speakers at the ABS Vegas conference this week appeared to be that the MBS market is unlikely to change significantly this year. “The status quo is comfortable,” said Larry White, an economics professor at New York University’s business school. Issuers of non-agency MBS are working on reducing the government-sponsored enterprises’ dominance of the secondary market for mortgages, but the chicken-and-egg problem persists. New non-agency issuance has ground to a standstill, and Congress has been slow to move housing-finance reform legislation. In the meantime, industry observers expect...