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Inside MBS & ABS

January 13, 2017

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Non-Agency MBS Production Tumbled Sharply In 2016; Nonprime Sector Showed Some Life

In 2016, a mere $42.93 billion of non-agency MBS were issued, down 32.5 percent from the previous year, according to a new Inside MBS & ABS ranking and analysis. It was the second-lowest annual output since 2012. The picture would look a bit brighter if Fannie Mae and Freddie Mac credit-risk transfer deals were included, as well as single-family rental securitizations, which both compete for the investors that might be interested in non-agency MBS. But the government-sponsored enterprise CRT deals are debt issues and they couldn’t be any more “agency,” while the SFR securitizations look a lot more like commercial MBS than residential MBS. The prime jumbo market hit...[Includes three data tables] Read More

Fourth-Quarter Slump in New GSE Credit-Risk Transfers Leaves 2016 With Small Increase from Previous Year

Fannie Mae and Freddie Mac last year issued a combined $12.93 billion of debt notes that pay investors based on the performance of reference pools, according to a new Inside MBS & ABS analysis of their credit-risk transfer programs. That was up just 2.8 percent from the 2015 volume of new issuance in Fannie’s Connecticut Avenue Securities program and Freddie’s Structured Agency Credit Risk program. It brought total issuance in the two platforms, which started issuance in late 2013, to $38.08 billion. Interestingly, total new single-family MBS production by the two government-sponsored enterprises was...[Includes one data table] Read More

FHA’s New Pricing Adjustment Could Boost Ginnie Mae Issuance, Trigger Prepayments on Premium MBS

The 25 basis-point mortgage insurance premium cut announced this week by the Department of Housing and Urban Development’s departing leadership could switch $50 billion of issuance from Fannie Mae/Freddie Mac business to FHA as well as cause premium Ginnie Mae MBS to prepay faster, according to market analysts. Absent any adversarial pricing by private mortgage insurers, a guaranty fee adjustment by the Federal Housing Finance Agency or a reversal by the Trump administration, analysts with Bank of America Merrill Lynch see up to 12 percent of purchase and 2 percent of refis shifting to FHA. On June 9, HUD Secretary Julian Castro announced... Read More

Judge OKs BofA Settlement; SEC to Resubmit Payout Plan; Court Affirms Dismissal of Repurchase Claims

Judge William Pauley of the U.S. District Court for the Southern District of New York has approved a $335 million settlement by Bank of America with three pension funds and other investors to resolve a securities class-action against the bank. The settlement is one of the largest class-action settlements of securities-purchase claims arising from the financial crisis, according to the Pennsylvania Public School Employees’ Retirement System (PSERS), the court appointed lead plaintiff in the six-year old case. Other investors include... Read More

Blackstone Files IPO Documents on Invitation Homes, a Pioneer in SFR Securitizations; But IH Is Losing Money

The Blackstone Group this month filed its long awaited initial public offering document on its Invitation Homes unit, a pioneer in single-family rentals and securitization of these assets. The 1,300 page Form S-11 is chock full of financial details on the real estate investment trust, including the revelation that the company continues to lose money. Through the first nine months of 2016 – the latest available data – Invitation Homes posted a net loss of $51.6 million compared to a $121.7 million loss in the same period a year earlier. The numbers and commentary in the filing indicate... Read More

The Outlook for GSE Reform Brightens, But When and How is a Different Story

Change in the political balance in Washington that put the GOP in control of both houses of Congress and the executive branch has fueled speculation that something will finally be done to resolve the conservatorships of Fannie Mae and Freddie Mac. As in the past, there is no shortage of competing proposals. At an Urban Institute seminar this week, Rick Lazio, former Republican congressman from New York, said... Read More

Basel Capital Requirements’ Impact on Non-Agency MBS Activities Uncertain, According to GAO

Capital requirements regarding bank holdings of non-agency MBS increased significantly after federal regulators implemented Basel III reforms in 2014. And while banks have largely been reluctant to re-enter the market for non-agency MBS issuance, a recent report by the Government Accountability Office suggests that the impact of bank involvement in the non-agency MBS market is unclear. The GAO was asked to explain how capital requirements for a mortgage depend on how the loan is financed and how the requirements have changed since the financial crisis. The report was requested by Sen. Richard Shelby, R-AL, who until recently was the chairman of the Senate Committee on Banking, Housing and Urban Affairs. The GAO noted... Read More

Multiple ABS Sectors Expected to Turn in Stable Performances This Year, Analysts Say

With financial markets awaiting, with some uncertainty, the public policy positions of the incoming Trump administration and the new Congress, industry analysts say ABS investors can expect most sectors to turn in stable performances in 2017. “As we look back on 2016 and consider the 2017 global structured finance outlook, most markets and their credit conditions seem favorable, and in some cases, even ideal. However, 2017 has many unknowns, especially the specific policies and priorities that will be adopted by the new U.S. administration,” said analysts with S&P Global Ratings in a recent outlook report. “Some would suggest government-sponsored enterprise privatization is possible, risk retention could be revised, and an appropriate/globally consistent capital treatment for structured finance products could be approved.” Further, “For the most part, we expect... Read More

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