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Inside MBS & ABS

June 16, 2006

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Bush Administration Casts Another Shadow Over MBS Invest-ment Portfolios at Fannie and Freddie

Already under a growth freeze and facing tougher competition from other investors, the largest investors in the mortgage securities market this week learned that government regulators are taking a new look at how Fannie Mae and Freddie Mac fund their massive MBS portfolios. Few analysts expect the Treasury Department to come to any radical new policy as it reviews its process for approving debt issues by the government-sponsored enterprises, a review that was discussed by… Read More

Clamor Over GSE Reform Continues; Senators Grill Fannie Ex-ecs, Squabble Over Systemic Risk, Safety and Soundness

Two weeks ago, Sen. Richard Shelby, R-AL, predicted the Senate’s bill to reform oversight of the government-sponsored enterprises would make it to the floor of the Senate for a vote before summer’s end. But the prospects for full Senate passage remain as unclear as ever, as the latest hearing on Fannie Mae’s $10.6 billion accounting and management scandal provided a vivid reminder that deep partisan divisions remain. … Read More

Moody’s, Fitch Revise Views on Servicing Fees On Some Pools, But Still Fall Short of Suggestions

Moody’s Investors Service and Fitch Ratings have decided that high-quality non-agency MBS don’t require 25 basis points of mortgage servicing fee, the decades-old industry standard that issuers and investors have vigorously debated in recent years. Moody’s reviewed prime-quality loan pools (not Alternative A) with varying minimum servicing fees over the past several months and determined that a servicing fee of 17.5 bps is sufficient for prime jumbo fixed-rate mortgages. The firm thinks that 20 bps… Read More

House Panel Approves Legislation to Boost Competition in Rat-ings Business

The House Financial Services Committee this week approved legislation designed to boost competition in the securities rating business, improve transparency in the ratings process and lower prices for obtaining ratings. Of particular note for the MBS and ABS markets, the “Credit Rating Agency Duopoly Relief Act,” H.R. 2990, would also prohibit the “notching” practices by the rating services. Notching – the lowering of ratings on asset-backed securities when the rating service does not rate a… Read More

Subprime MBS Market Cools in 1Q06, But Flurry of Activity Could be Ahead

Issuance of bonds backed by subprime mortgages fell off a bit during the early part of 2006, but some observers are bracing for an onslaught of activity that could help put the market on track to top last year’s record volume. According to the Inside Mortgage Finance MBS Database, $123.46 billion in new subprime MBS were issued during the first quarter of this year. While that marked a 19.5 percent increase over the same… [Three data tables included] Read More

Servicers Continue to Grapple With Reg AB While Investors Enjoy the Additional Data

Months after the implementation of the Securities and Exchange Commission’s Regulation AB, investors continue to warn that servicing shops are set to have the most difficulties complying with the regulation’s tough disclosure standards. At the American Securitization Forum’s annual meeting last week in New York, William Felts, senior vice president and director of mortgage finance at CitiMortgage, said the SEC could crack down on servicers next year. “There is some concern we may see some… Read More

DTCC Allies with Industry Groups to Solve Nagging Structured Securities’ Payment Processing Problems

The Depository Trust & Clearing Corp. is working with securities industry groups to make processing of principal and interest payments for collateralized mortgage obligations and asset-backed securities more efficient, accurate and timely. With the rapid growth of the structured securities markets, including CMOs and ABS, late and inaccurate notifications of payment rates have grown as well and continue to be major concerns despite corrective efforts in the last two years, according to a white… Read More

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