Commercial banks and thrifts continued to have modest interest in holding non-mortgage ABS during the first quarter of 2017, according to a new Inside MBS & ABS ranking and analysis. The banking industry held $123.43 billion of ABS in its held-to-maturity and available-for-sale investment portfolios at the end of March. That was down 0.3 percent from December. The overall supply of ABS outstanding, excluding collateralized debt obligations, fell...[Includes two data tables]

While the industry continues to debate the merits of allowing Fannie Mae and Freddie Mac to build a capital cushion for “zero day” in 2018, investors in MBS have a different agenda: making sure that whatever the future holds for the government-sponsored enterprises, it had better include a federal guarantee on conventional mortgage securities. Without it, the MBS market would suffer greatly – as would residential lending and the sale of new and existing homes. So far, no one knows...

There are signs of trouble ahead for the subprime auto ABS sector that warrant closer attention to the financial health of that class of borrowers, but it looks like the rising risk is contained, according to some research reports published this week by a pair of Wall Street analysts. In one of the reports, Wells Fargo Securities analysts John McElravey and Ryan Brinkoetter warned of the implications for the fiscal soundness of the borrowers involved. They reviewed the total and voluntary prepayment rates of the major subprime auto ABS issuers, and calculated the average prepayment curves by deal age for issuer and vintage over the 2013-2016 time period. “Much of the analytical focus in auto ABS has been...

Four whole-business securitizations totaling $3.58 billion are in the works, according to presale reports, including a $900.0 million deal from Coinstar. The securitization from Coinstar received a preliminary BBB rating from Kroll Bond Rating Agency. The company owns nearly 20,000 kiosks that count change located in grocery stores and other retail venues, mostly in the U.S. The company generates...

The Consumer Financial Protection Bureau last week announced it will assess the effectiveness of its ability-to-repay/qualified-mortgage rule, as per the requirements of the Dodd-Frank Act, and is asking for public input. The CFPB will examine the impact of major provisions of the rule on mortgage costs, origination volumes, approval rates and subsequent loan performance. A special focus is on self-employed borrowers, those with seasonal or part-time income and borrowers with income from assets. Another topic for review is...

Citadel Servicing Corp. and Angel Oak Companies – two of the most active nonprime lenders operating today – are looking at record originations for the second quarter and all of 2017. But don’t expect a torrent of conventional lenders to jump into the space anytime soon. According to interviews conducted by Inside Mortgage Finance in recent weeks, there’s plenty of interest in the “new” subprime market, a business predicated on sober loan-to-value ratios and rigorous underwriting, but most conventional lenders do not see it as safe. At least not yet. “Right now, there’s...

The banking industry again boosted its holdings of single-family MBS during the first quarter of 2017, although results varied significantly among various major players in the market. Banks and thrifts reported $1.762 trillion in held-to-maturity and available-for-sale MBS as of the end of March, a 1.5 percent increase from the previous quarter, according to a new Inside MBS & ABS ranking and analysis of bank call reports. With Federal Reserve MBS purchases in a holding pattern, banks and other investors are in a better position to increase their holdings as the supply of agency MBS slowly grows. The industry held...[Includes two data tables]

Recent remarks by Craig Phillips, counselor to the secretary of the Treasury Department, suggest that the Trump administration supports proposals to reduce regulatory burdens in the MBS and ABS markets. The agency is in the process of finding regulations that can be “clarified, modified or tailored” to help boost the housing market. “We believe it’s time to assess whether regulatory requirements have unnecessarily tightened the credit box for new originations,” Phillips said at a credit-risk transfer symposium in New York City. “Regulatory requirements have also contributed to increased cost in servicing. Capital and liquidity standards have put private-label securitization at a disadvantage.” The Structured Finance Industry Group noted...

Two of the most active nonprime originators operating today may be headed in different directions when it comes to securitizing the non-qualified mortgages they’ve been originating. An official at the Angel Oak Companies told Inside MBS & ABS this week that the lender hopes to securitize at least once a quarter “going forward.” Citadel Servicing Corp., Irvine, CA, had hoped to issue its first security either late this month or in June, but appears to be pushing back its timetable. Dan Perl, CEO and founder of Citadel, declined...

A new working paper from University of California at Irvine economics professor Eric Swanson suggests the U.S. central bank’s bond buying activities will continue, to one extent or another, perhaps indefinitely. The reason? What the Federal Reserve did in the wake of the financial crisis produced longer-lasting results than what it said. Swanson, a former researcher at the Federal Reserve Bank of San Francisco, said both the Fed’s Open Market Committee guidance on the likely future path of the federal funds rate and its large-scale asset purchases (LSAPs) have had positive effects. The goal of both policies was...