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Inside MBS & ABS

August 25, 2017

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Bank ABS Holdings Drift Lower Again in 2Q17 Despite Continued Growth in Outstanding Supply

Commercial banks and savings institutions have been steadily adding to their residential MBS portfolios, but they show significantly less interest in the non-mortgage ABS market. Total bank investment in non-mortgage ABS sank again in the second quarter, dropping by $5.05 billion from the end of March to $118.38 billion. Compared to a year ago, bank ABS holdings were down 9.6 percent and they’ve been in steady decline since the end of 2013. It’s...[Includes two data tables] Read More

Agency-Backed CMO Production Slumped in 2Q17; Wells Fargo Leads in Underwriting Race

Fannie Mae, Freddie Mac and Ginnie Mae issued a combined $41.95 billion of collateralized mortgage obligations backed by single-family MBS during the second quarter, according to an analysis and ranking by Inside MBS & ABS. Agency CMO issuance was down 17.2 percent from the first three months of the year, with Freddie taking the biggest hit – a 30.9 percent drop in production. Ginnie had the smallest quarterly decline, 5.1 percent. On a year-to-date basis, all three agencies are...[Includes one data table] Read More

SFIG Calls for Greater Transparency from Non-Agency MBS Trustees in Wake of Wells Withholding Funds

The Structured Finance Industry Group pushed for trustees of non-agency MBS to increase disclosures to investors as the industry continues to deal with the aftermath of Wells Fargo withholding millions of dollars of funds in vintage deals. In a statement released late last week, the industry group said it has a policy of not engaging in issues involving legacy transactions that may be associated with litigation, especially where such litigation is between various members of SFIG. The Wall Street group issued... Read More

Signs are Bullish for Mortgage-Investing REITs – Thanks, In Part, to the Federal Reserve and Its Balance Sheet Policy

Real estate investment trusts that invest in MBS and other mortgage-related assets are having a field day this year, raising billions of dollars in new capital while seeing their share prices increase across the board. Moreover, according to an analysis by Inside MBS & ABS, several top-ranked REITs are now trading much closer to their 52-week highs than their lows while maintaining hefty dividend payments to their shareholders. Annaly Capital Management, for example, the largest holder of agency MBS at $75.2 billion, is... Read More

Fitch to Allow AAA Ratings for Scratch-and- Dent MBS with Shifting-Interest Structure

Fitch Ratings announced last week that non-agency MBS with a unique structure will be eligible to receive AAA ratings. The rating service said deals with a shifting-interest structure are now eligible for the top ratings after previously limiting ratings on such deals to single-A. Both DBRS and S&P Global Ratings have assigned AAA ratings to some MBS backed by re-performing mortgages where the deals had shifting-interest structures. MBS with such structures distribute... Read More

CMBS Face GAAP Dilemma When Deciphering ‘True Sales,’ Market Looks to SEC for Answers

The commercial MBS market is facing a new challenge as questions have been raised about the “true sale” treatment of these transactions under generally accepted accounting principles. The issue arises from risk-retention requirements that went into effect in late 2016. “Failure of accounting sale treatment means the selling bank cannot book the gain and does not derecognize the underlying loans resulting in the entire portfolio of loans remaining on its balance sheet for both GAAP and presumably, for risk based capital purposes,” according to the Dechert law firm. In order to benefit from an accounting true sale, each third-party holder of a beneficial interest in the securitization must have... Read More

Despite Mounting Signs of Trouble in Auto Market, Fundamentals are Solid, Investors are Protected

Even though indications of stress in the U.S. auto market are proliferating, risks in the auto loan ABS sector are still under control and investors are protected by healthy levels of credit enhancement, according to industry analysts. “Despite late-cycle indicators continuing to garner headlines – softer used-car pricing, rising inventories, weakening headline seasonally adjusted annual sales, and rising loan losses – we remain comfortable with auto loan ABS fundamentals,” according to a new report from Kroll Bond Rating Agency. KBRA did concede... Read More

Mortgage Reinsurance: A Viable Growth Source But A Difficult Risk to Offload, Warns S&P

Relatively stable pricing and fairly healthy returns are giving mortgage reinsurers hope for a more robust market, according to a new analysis from Standard & Poor’s. Reinsurers seeking respite from a deteriorating property casualty reinsurance sector have found mortgage reinsurance a promising business diversification and source of growth – at least for now, said the rating service. However, reinsurers coming late to the feast might find... Read More

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