Borrowers with loans in various types of MBS and ABS could be stretched as interest rates increase, according to industry analysts. Prepayment rates are also likely to slow.
Fannie priced a credit-risk transfer deal linked to single-family mortgages; the SEC won’t take an enforcement action against Two Harbors; performance of consumer ABS backed by loans originated by marketplace lenders expected to decline.
Non-agency MBS hit the market ahead of Thanksgiving; rating upgrades possible with new commercial MBS methodology at Moody’s; timeshare securitization performance stable; Fitch extends comment period for proposed criteria to rate shipping container ABS; California launches tobacco-settlement securitization.
Changes implemented in response to the financial crisis of 2008 helped the MBS and ABS markets perform better than expected at the onset of the pandemic.
At one point during the pandemic, used car prices were up 50% year over year. Now, appreciation is around 20%, prompting speculation that auto ABS performance will take a hit.
CLO issuance has gained speed with the macro environment looking good and interest rates rising. Note: While S&P was quick to downgrade deals during the pandemic, upgrades have been slower.
The extension rate on loans in auto ABS declined again in February. Still, extensions are elevated compared with a year ago, just before the pandemic hit the economy.
Loan extensions on auto ABS increased for the third straight month in November amid rising coronavirus cases. Losses for investors could be around the corner, according to S&P Global Ratings.
Issuance of container ABS surged in the third quarter of 2020 only to deflate in the fourth quarter. KBRA has a positive outlook for the sector despite the ongoing coronavirus.
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