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Inside MBS & ABS

September 8, 2006

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WaMu Taps Strong Overseas Appetite for US Mortgage Securities with Unique Alternative Financing Strategy

Washington Mutual this week announced a new “covered bond” program that will give the top-tier mortgage originator – and MBS issuer – an alternative to traditional mortgage securitization and borrowing from the Federal Home Loan Bank System. The $26 billion program, which is being promoted in various European locales during the next two weeks, is unique in that it permits the covered asset pool of mortgages to stay on the company’s balance sheets, according to officials at Standard & Poor’s, which gave a preliminary triple-A rating to the bonds... Read More

Securitization Rates Remain at Historically High Levels Through Midway Point in 2006

Securitization remained the dominant form of financing new residential mortgage production through the first half of 2006, accounting for over two-thirds of the funding for the period’s unexpectedly strong production levels. According to a new analysis by Inside MBS & ABS, 67.4 percent of new mortgage loans originated in the primary market during the first six months of the year were packaged in mortgage-backed securities. That’s a sharp decline from the record securitization rate of 70.5 percent set during...[One full-page data chart included.] Read More

Better Late than Never: Freddie Launches 40-Year Fixed-Rate Mortgage Securitization Program

Freddie Mac has jumped on the extended-amortization bandwagon with the launch of a new 40-year fixed-rate mortgage program. The new 40-year program, outlined in Bulletin 2006-3, will allow the government-sponsored enterprise to compete in a segment of the market that many observers expect will grow dramatically in the months ahead, as issuers shift their product mixes away from interest-only loans to avoid the problems associated with payment shock. The fixed-rate feature is important because borrowers are expected to increasingly... Read More

How Much Would S. 190 Cut Fannie’s Portfolio, And How Much of a Difference Would it Make?

Fannie Mae officials last week said the tough reform bill pending in the Senate could force the government-sponsored enterprise to slash its huge MBS portfolio to as little as $10 billion – about as much as Amsouth Bank holds. Proposed caps on GSE retained portfolios have been the most hotly debated issue in the long-stalled effort to enact stronger regulatory oversight of Fannie Mae, Freddie Mac and the Federal Home Loan Banks. As Congress returned from recess this week, the legislation remains deadlocked in the Senate... Read More

MBA to Renew REMIC Modernization Effort in ‘07, Tax Panel Estimates $730 Million Loss in Revenues

The Mortgage Bankers Association said it will take another stab at getting legislation in 2007 to modernize outdated REMIC rules for structuring commercial MBS, after leaving a congressional tax panel with sufficient cause to reconsider the measure next year. Kurt Pfotenhauer, MBA senior vice president for government affairs and public policy, said his group presented skeptical members of the Joint Committee on Taxation last week with a “lot of evidence” showing that pending REMIC modernization legislation will not cost... Read More

Wall Street Still Hungry for Production As Merrill Lynch Acquires First Franklin

Continuing a string of acquisitions of originators by Wall Street firms, Merrill Lynch this week announced it is set to acquire First Franklin Financial from National City Corp. for $1.3 billion. And in a separate transaction, Merrill Lynch also expects to buy about $5.6 billion of First Franklin’s loans from National City. The moves come on the heels of Morgan Stanley’s acquisition of Saxon Capital. Deutsche Bank and Barclays also recently acquired originators to feed their mortgage-backed securities business... Read More

CDO Investors Should Heed Risks of Growing Subprime Mortgage Product Mix, Fitch Warns

An influx of securities backed by subprime mortgages is exposing investors in collateralized debt obligations to increased risk, a new report by Fitch Ratings suggests. “Structured finance CDOs may experience loss of excess spread from subprime residential MBS collateral, downgrades or writedowns on subprime RMBS collateral in extreme scenarios as borrowers with ARM products experience payment shock at their reset dates,” Fitch warned in an Aug. 21 report... Read More

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