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Inside MBS & ABS

April 27, 2012

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Steady as She Goes at the FOMC as Moderate Recovery Continues, With Housing Still Depressed

The Federal Open Market Committee left key federal funds rates unchanged at its latest meeting this week, and continued its agency debt and MBS reinvestment policies, with no sign on the horizon of a change any time soon. “The committee is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency MBS in[to] agency MBS and of rolling over maturing Treasury securities at auction,” the FOMC statement said. “The committee will regularly review the size and composition of its securities holdings and is prepared to...(Includes one data chart) Read More

Option One Settles Charges Over Subprime MBS Issuer’s Inability to Honor Repurchase Demands

Option One Mortgage Corp. this week agreed to pay $28.2 million to settle charges brought by the Securities and Exchange Commission over the former subprime lender’s MBS disclosures regarding its ability to cover repurchase demands. Much of the litigation over failed non-agency MBS has focused on alleged misrepresentation about the quality of the loans delivered to securitization trusts, the servicing of those loan pools and the performance of trustees. The Option One settlement stems from the SEC’s contention that the company, one of the leading subprime lenders and securitizers during the heyday of... Read More

BayernLB Files Securities Fraud Lawsuit Charging Deutsche Bank With Selling ‘Crap’ Residential MBS

Germany’s second largest state-owned bank is looking to the U.S. courts for relief after accusing Deutsche Bank of perpetuating a fraud on it in the sale of over $810 million in toxic residential MBS. Last week, Bayerische Landesbank (BayernLB) filed suit against Deutsche in New York State Supreme Court in Manhattan alleging that Deutsche packaged risky and poor quality loans into securities while simultaneously taking short positions against the securities. According to the complaint, Deutsche officials internally disparaged the quality of the loans underlying the residential MBS even as it... Read More

HARP 2.0 Lenders Hold 125 LTV Loans While Awaiting Securitization Option

Although Fannie Mae and Freddie Mac have begun buying the latest generation of Home Affordable Refinance Program mortgages with loan-to-value ratios exceeding 125 percent, a number of lenders are holding these loans in the pipeline until the government-sponsored enterprises open the spigot on securitization options for these loans. According to the Federal Housing Finance Agency, Fannie and Freddie purchased 1,548 of the high LTV HARP loans in February. FHFA Senior Associate Director Meg Burns said during an Inside Mortgage Finance webinar this week that a similar volume of 125+ LTV loans were... Read More

Fitch Puts MBS Serviced by ResCap on Rating Watch, Analysts Believe Ally Financial Will End Support Soon

Fitch Ratings has placed 157 residential MBS classes serviced by Residential Capital on Rating Watch Negative as the ailing subsidiary of Ally Financial slid closer to bankruptcy. The rating action came on the heels of a Fitch downgrade of ResCap’s issuer default rating to ‘C’ from ‘CCC’ on April 18. In addition, Fitch placed GMAC Mortgage’s servicer rating on Rating Watch shortly before the adverse rating action against ResCap. Fitch said the coordinated rating actions reflect the current uncertainty for the servicing portfolio due to the growing possibility of a bankruptcy or debt restructuring for... Read More

Moody’s Leads in Non-Mortgage ABS Ratings, But Still on the MBS Sidelines

Moody’s Investors Service has not rated a non-agency MBS since the end of 2010, but the company has made up for it by taking a lead role in the non-mortgage ABS market, according to a new ranking and analysis by Inside MBS & ABS. Moody’s rated 37 non-mortgage ABS issued during the first quarter of 2012, a total of $33.85 billion in new issuance. That represented 84.5 percent of the market by dollar volume, an increase from the 70.4 percent market share the company garnered for all of 2011. Its deepest penetration was in the business loan category, which includes dealer...(Includes one data chart) Read More

SEC Approves FINRA Changes to Make TBA Deals More Transparent, Promote Fair Pricing of MBS

The Securities and Exchange Commission gave a thumbs-up last week to some changes to the rules governing the to-be-announced market proposed by the Financial Industry Regulatory Authority to increase transparency in agency pass-through MBS transactions. The new changes will institute clear requirements for more timely reporting of two subsets of MBS TBA transactions – those that are “for good delivery” (GD) and those that are “not for good delivery” (NGD) – and include some information that has not been publicly disclosed before. The intent of the changes is to improve the ability of investors to... Read More

Structured Settlement Securities Provide Different Risks than Other Esoteric ABS

While the niche structured settlement ABS sector is dominated by one market actor, such deals have little risk and low loss levels, making them appealing investments, Barclays Capital said in a recent report. Structured settlement ABS are often backed by legal agreements in which a defendant agrees to pay a plaintiff in scheduled payments to satisfy the settlement amount, commonly used to settle malpractice, personal injury and product liability suits. In recent years, as lottery winners have a similar option of receiving payments through a timetable, lottery winnings have also been used in structured... Read More

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