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Inside MBS & ABS

February 9, 2012

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Principal Reduction in Robosigning Settlement For Portfolio Loans, Investors Can Breathe Easy

The newly announced $25 billion settlement over foreclosure servicing practices is not expected to have much impact on MBS investors because most of the principal reductions that the five banks agreed to make will involve unsecuritized mortgages they hold in portfolio. The settlement involves all states except Oklahoma, two federal agencies and five major servicers, and requires the banks to “work off up to $17 billion in principal reduction and other forms of loan modification relief nationwide,” according to a summary of the agreement. Although the actual settlement had not been released as... Read More

U.S. Triparty Repo Market Draws Investors Again With Deep Discounts, Subprime, Alt A Collateral

A new report from Fitch Ratings finds that risk appetite is returning to the U.S. triparty repo market, thanks in part to deeply discounted collateral, much of which is in the form of Alt A and subprime residential MBS and collateralized debt obligations. Fitch’s study of the market is based on repo transaction information drawn from a sample of the 10 largest U.S. prime money market funds’ financial statements. Fitch’s sample encompasses about $90 billion in repo transactions as of the end of August 2011, which represents slightly more than 5 percent of the $1.6 trillion U.S. triparty repo market... Read More

New York FRB Announces Winning Bid to Purchase AIG-Linked Subprime MBS Portfolio

The Federal Reserve Bank of New York ended a week of speculation in the non-agency MBS market with the sale, through competitive bidding, of $6.2 billion of MBS linked to the taxpayer bail-out of mega-insurer AIG. The winning bid came from Goldman Sachs, one of five firms the Fed invited to submit bids on the multibillion-dollar Maiden Lane II (ML II) portfolio of subprime MBS held by the agency. The other bidders included the securities arms of Morgan Stanley, Royal Bank of Scotland, Barclays and Credit Suisse. This week’s transaction followed a $7.0 billion MBS sale on Jan. 19 to Credit Suisse from the same... Read More

Moody’s Ranked as Top Rating Service in ABS Market, But Last in Non-Agency MBS

Moody’s Investor Services ranked as the most active rating service in the non-mortgage ABS market last year, but finished 2011, as the least involved in non-agency MBS activity, according to a new Inside MBS & ABS ranking and analysis. Moody’s rated a total of $89.3 billion of non-mortgage ABS last year, or 70.4 percent of total issuance. That was up from a 53.7 percent share in 2010, when Moody’s rated some $58.9 billion and finished second to Standard & Poor’s. Moody’s strengths in 2011 were in the credit card, vehicle finance and business loan sectors, capturing over 70.0 percent of each of those... Read More

Banks, Wall Street Firms to Face New SEC Legal Action Over Mortgage Securities Linked to Crisis

A week after federal and state enforcement agencies launched a residential MBS investigative effort, reports have surfaced that Ally Financial, Bank of America, Citigroup, Deutsche Bank and Goldman Sachs are about to be sued by the Securities and Exchange Commission for allegedly misrepresenting the quality of mortgages they packaged and sold to investors. Officials at the SEC, which never confirms specific Wells Notices of impending legal action, declined to comment on the investigation, as did spokesmen for Ally, Citi and Goldman. Representatives from Bank of America and Deutsche Bank did not... Read More

Economists Tell Senators Principal Writedowns Key To Recovery, Fault FHFA’s Anti-Reduction Stance

Housing economists challenged the Federal Housing Finance Agency’s controversial stance against permitting Fannie Mae and Freddie Mac to allow principal forgiveness in loan modifications, telling U.S. senators this week that mortgage loan writedowns would go a long way to cure the ongoing housing crash and foreclosure crisis. Testifying before the Senate Committee on Banking, Housing and Urban Affairs, Moody’s Analytics Chief Economist Mark Zandi told lawmakers that government policy encouraging more mortgage modifications, particularly those involving “substantial principle writedowns” would... Read More

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