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Inside MBS & ABS

May 26, 2006

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Portfolio Cap Imposed on Fannie as GSE Settles Federal Investigations at a Cost of $400 Million

Fannie Mae this week agreed to cough up $400 million to settle charges of mismanagement and bad accounting practices brought by federal regulators – but a bigger issue for the mortgage securities market may be the cap on Fannie’s mortgage investment portfolio included as part of the deal. Under an agreement with the Office of Federal Housing Enterprise Oversight and the Securities and Exchange Commission, Fannie’s retained portfolio will be capped at $727.2 billion … Read More

Securitization Rates Jump in Early 2006 as Primary Market Edges Back Toward Fixed-Rate Mortgages

A record share of home mortgages originated in the first three months of 2006 were packaged in mortgage-backed securities, according to a new analysis by Inside MBS & ABS. The first quarter’s 74.2 percent securitization rate for the mortgage market represents the highest level ever recorded in the market, and a sizable increase from the 67.5 percent rate set for all of last year. Securitization rates were up in all the major categories of the… [One data table included] Read More

Secondary Mortgage Market Shuns Some New and Emerging Mortgage Products

Nontraditional mortgage products such as interest-only loans, 40-year mortgages, and option ARMs have found a home in the secondary market, accounting for a growing percentage of the collateral backing non-agency MBS deals. But some other products are finding the path to secondary market acceptance – and possible securitization – a bit rocky. … Read More

New Fitch Interest Rate Model to Affect Subprime MBS Ratings, Company Updates AVM Policy

Fitch Ratings announced new structured finance interest rate stress criteria for LIBOR transactions. The methodology is more sensitive to market expectations because it is based on forward rates and implied volatility. Separately, the company updated its policy on automated valuation models. The stress-test change will have an impact on subprime MBS and collateralized debt obligations, according to Fitch. “In terms of impact from the methodology change, CDOs and subprime mortgage bonds stand out because of… Read More

Fannie Mae and Freddie Mac Pick Up Some of the Slack in Declining ARM Securitization Volume

New production of MBS backed by adjustable rate mortgages dropped 4.8 percent from the fourth quarter of 2005 to the first three months of this year, according to a new analysis and ranking by Inside MBS & ABS. A total of $237.8 billion of ARM loans were securitized in the first quarter, or about 47 percent of total MBS issuance during the period. Compared to a year ago, ARM securitization volume was actually up slightly. … [One data table included] Read More

Bear Stearns Adjusts OAS Model to Account for Rising Interest Rates

With interest rates rising, Bear Stearns has updated its option-adjusted spread model to account for a possibly prolonged period of high interest rates and what that could mean for mortgage-backed securities. Investors’ biggest complaint about OAS modeling was its lack of transparency, according to Dale Westhoff, a senior managing director at Bear Stearns. He noted that traditional OAS models discard 99 percent of path-level results, reporting the single average or expected spread. … Read More

Deutsche Bank Purchases Originator To Boost Mortgage Securities Business

With hopes of boosting its residential mortgage-backed securities business, Deutsche Bank will acquire Chapel Funding, a California-based mortgage originator. Terms of the sale were not disclosed and it is subject to regulatory approval. “This transaction is an important step for Deutsche Bank as we continue to develop a vertically integrated residential mortgage-backed securities business,” said Phil Weingord, a Deutsche Bank managing director. “The integration of a mortgage originator will provide significant competitive advantages, such as… Read More

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