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Inside MBS & ABS

August 15, 2008

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Covered Bonds May Someday Play Major Role In Mortgage Finance, But Look for Slow Start

Federal regulators are pushing loudly for the development of covered bonds backed by home mortgages, but their cautious approach on bond collateral, less-than-ideal regulatory structure and stiff competition from other funding sources suggest a slow ramp up to speed. With support from the Treasury Department, the Federal Deposit Insurance Corp. earlier this year announced an interim... Read More

Wall Street Says Pools with Higher Balance HERA Loans Are Eligible for TBA Trades

Higher-balance mortgages originated in high-cost markets under the new permanent conforming loan limits established by the recently enacted Housing and Economic Recovery Act of 2008 will be eligible for to-be-announced pools beginning Jan. 1, 2009, Wall Street announced this week. The Securities Industry and Financial Markets Association said it is still finalizing the eligibility... Read More

Fannie, Freddie Backpedal from Non-Conforming Market That Continues to Put Pressure on Earnings

Don’t look for Fannie Mae and Freddie Mac to provide a great deal more support for the MBS market beyond continuing to churn out a heavy volume of new MBS as both government-sponsored enterprises are scrambling to deal with viral subprime and Alt A holdings and have little free capital to use to build up their portfolios. Fannie late last week announced it will stop buying Alt A mortgages by the end... Read More

Rating Service Market Shares Tumble as Non-Agency MBS Production Dries Up

Moody’s Investors Service has emerged as the most active rating company in the severely depleted non-agency MBS market, supplanting long-time industry leader Standard & Poor’s, according to a new ranking and analysis by Inside MBS & ABS. Moody’s was credited with rating 67.6 percent of the rated non-agency MBS issued during the... [Includes two charts] Read More

Further Decline in Housing Lead Rating Services to Revise Loss Assumptions

Fitch Ratings and Standard & Poor’s both revised their loss assumption models last week, which will impact ratings of prime, subprime and Alt A pools. Fitch retooled its ResiLogic default and loss model for the second time since it was introduced in 2006 as a tool to project losses and loss coverage based on loan-level analysis of non-agency MBS. The changes will affect only new... Read More

Top Credit Unions Report Huge Paper Losses on MBS, But NCUA Says Most Holdings Perform as Expected

Five top corporate credit unions have reported a combined $5.7 billion in accumulated unrealized losses on their MBS holdings as of the end of May, but the “vast majority” of MBS held by corporate credit unions is still highly rated and performing as expected, according to regulators. At issue are the MBS holdings of U.S. Central FCU, Western... [Includes one chart] Read More

Moody’s to Launch New Mortgage Metrics Model for Subprime Loans

Moody’s Investors Service late this week is scheduled to release an updated model for assessing subprime MBS issuance. The new model incorporates more vigorous simulation capabilities, greater transparency into the impact of various economic scenarios, like house-price appreciation and U.S. unemployment on expected loss, explicit treatment of mortgage underwriting... Read More

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