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Inside MBS & ABS

May 31, 2012

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Securitization Continues Funding Vast Majority Of Residential Mortgages Originated in 2012

Thanks to the ongoing domination of the MBS market by Fannie Mae, Freddie Mac and Ginnie Mae, securitization continued to fund the overwhelming majority of home loans originated during the first three months of 2012. A new Inside MBS & ABS analysis revealed that the volume of securitized newly-originated residential mortgages equaled a whopping 97.0 percent of home loans originated during the first quarter of this year. That came close to the record 99.7 percent securitization rate set back in the first quarter of last year. The delay between primary market origination...(Includes one data chart) Read More

Whistleblowers to Play Large Role in Increasingly Assertive Government Probes Into RMBS Fraud

Last week’s launch of the RMBS Working Group’s website demonstrated that government investigators see Wall Street insiders as a valuable source of information to detect and prove fraud and other misconduct in the packaging of mortgage securities. “Fraud can be hard to uncover without help from whistleblowers who were corporate insiders,” the task force said on the website. Whistleblowers can get rewards of up to 30 percent of the government’s monetary recovery based on the specific information, as well as protection from retaliation. The inclusion of a whistleblower provision in the Dodd-Frank Act has... Read More

FINRA Fines Citi Unit $3.5 Million For Inaccurate Subprime MBS Data

In a move intended to maintain the integrity of data that helps guide the decisions of MBS investors, the Financial Industry Regulatory Authority last week fined Citigroup Global Markets $3.5 million for allegedly providing “inaccurate mortgage performance information, supervisory failures and other violations” in connection with subprime residential MBS. “Citigroup posted data for its RMBS deals that it should have known was inaccurate; and even after they learned that the data was inaccurate, Citigroup did not correct the problem until years later,” said Brad Bennett, FINRA executive vice president and... Read More

Growth of Mortgage REIT Capitalization Continues Despite Economic Downturn, Erratic Recovery Pace

The growth of mortgage real estate investment trusts over the last several years has been driven by high market returns and changes in the MBS and mortgage markets, according to a new sector analysis by Keefe, Bruyette & Woods. The National Association of Real Estate Investment Trusts reported that total mortgage REIT capitalization jumped to $43.0 billion at year-end 2011 from just $1.6 billion in 2000. Since the start of 2012, the combined market REIT capitalization has gone up to $55.0 billion, the group noted. The only setback to the growth trend occurred in 2008 as a result of the collapse of... Read More

SEC No-Action Letter on Covered Bonds Could Boost Demand for Dollar-Backed Bonds, Says Fitch

The Securities and Exchange Commission’s no-action letter that cleared the way for the Royal Bank of Scotland to register public offerings of covered bonds is likely to fuel demand for U.S. dollar-denominated covered bonds, according to Fitch Ratings. The SEC letter paves the way for issuers to offer covered bonds to a wider range of investors than previous bonds issued under the restrictive Rule 144A of the Securities Act of 1993, said Fitch analyst Vanessa Purwin. The rule provides a safe harbor from registration requirements for certain securities that are resold privately to qualified large... Read More

More Securitization Warehouse Facilities Looking for Credit Ratings, DBRS Says

More companies are seeking ratings for their warehouse lending facilities, but these programs require special consideration, according to a new report from DBRS. In the past, securitization warehouse facilities were mostly un-rated because they were completely executed and funded by banks or their conduits. But industry participants are now more keenly interested in assessing the relative risk of these entities, DBRS said. For instance, warehouse ABS may have a change in collateral composition thanks to a revolving period in warehouse facilities. To make up for this dynamism, other... Read More

Credit Fundamentals Remain Strong in Consumer ABS Sector Driven by Shifting Supply and Demand

It’s a good time to be on the playing field in the consumer ABS sector, as long as you’re on top of the trends in a perhaps more focused market environment characterized largely by shifting supply and demand dynamics, top industry representatives suggest. John McElravey, senior analyst and head of consumer ABS research at Wells Fargo Securities, told participants at last week’s national meeting of the American Securitization Forum that he’s seeing a revival of consumer ABS, noting rising issuance with a focus on the auto sector, along with a shorter maturity profile. Prime auto is about 32.1... Read More

FHFA-OIG Report: Treasury Bailout of Fannie, Freddie Stabilized the GSEs, Preserved the Secondary Market

The government’s multi-billion dollar investment bailout of Fannie Mae and Freddie Mac allowed the two government-sponsored enterprises to avoid an insolvency that could have triggered the collapse of the U.S. housing finance system, concluded a new report by the official watchdog of the GSEs’ regulator. The Federal Housing Finance Agency’s Office of Inspector General’s report – “Fannie Mae and Freddie Mac – Where the Taxpayers’ Money Went” – noted that the U.S. Treasury had dropped some $185 billion into the two GSEs since early September 2008 through the end of last year. “The enterprises’ shareholders lost... Read More

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