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Inside MBS & ABS

July 27, 2012

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Non-Agency MBS Market Headed Toward Record Low Issuance Level in 2012 as Resecuritization Slows

The non-agency MBS market could be headed toward its worst year ever for new issuance, and that’s saying something given its post-apocalyptic performance since 2007. New issuance of non-agency MBS totaled just $3.47 billion during the second quarter, a 31.2 percent drop from the first three months of the year, according to the Inside Mortgage Finance MBS Database. It wasn’t the slowest quarter ever, but it left the market at just $8.51 billion through the midway point in 2012, down 64.2 percent from last year’s level. Unless issuance picks up significantly in the second half of the year, 2012 will fall well short of the record low set in 2011. Although resecuritization activity picked up in the second quarter, posting a 30.7 percent gain from the first three months of the year, year-to-date issuance of these deals was down...[Includes three charts] Read More

Secondary Market Opposes Changing Bankruptcy Code to Alleviate Private Student Loan Debt Load

The American Securitization Forum opposes the notion of revising the federal bankruptcy code to enable overburdened student loan borrowers to lighten their debt loads, one of the suggestions in a new report on the state of private student loans that was released by the Consumer Financial Protection Bureau and the U.S. Department of Education. “The ASF continues to support strong underwriting standards and fully transparent disclosure to borrowers. At the same time, the ASF opposes reopening the bankruptcy code to allow borrowers to reduce or eliminate their student loan debt,” said ASF Executive Director Tom Deutsch. “Such action would eliminate educational opportunities for a broad swath of borrowers, as lenders would be less willing to offer loans, thereby curtailing credit availability.” Currently, consumers generally cannot discharge... Read More

Industry’s Vocal Opposition to Eminent Domain Plan Intensifies as Key Jurisdictional Meeting Approaches

California’s San Bernardino County Board of Supervisors has yet to decide if it wants to go ahead with a controversial proposal to seize performing underwater non-agency mortgages via eminent domain, repackage them and sell them to new investors. But just the fact they’re considering it has compelled some secondary mortgage market representatives to call in the big guns of the federal government to squash the notion. Late last week, Securities Industry and Financial Markets Association President and CEO Tim Ryan wrote to Treasury Secretary Tim Geithner, Federal Reserve Chairman Ben Bernanke, and Department of Housing and Urban Development Secretary Shaun Donovan to raise his membership’s concerns about the proposal and called on them to oppose it. “We believe that efforts by municipalities to employ the power of eminent domain to seize mortgage loans are... Read More

Walnut Place Withdraws Opposition to $8.5b BofA MBS Deal, Judge Upholds FHFA Case vs. ResCap

The investor group that had been seen as the most formidable opponent to Bank of America’s proposed $8.5 billion MBS settlement pulled out of the fight this week. Walnut Place submitted a motion to New York State Supreme Court Judge Barbara Kapnick, which she granted, to formally withdraw its objection to the BofA settlement. “Walnut Place respectfully requests that it be permitted to withdraw as an intervenor in this proceeding,” the investor group wrote to the judge. Walnut Place, which represents... Read More

SEC Provides MBS Guidance While Extending Time To Meet DFA Requirement on Rating References

Faced with a deadline it was unable to meet, the Securities and Exchange Commission this week published interpretive guidance regarding references in federal regulations to MBS ratings. The Dodd-Frank Act mandated that such references be changed by July 20, but the SEC’s guidance will keep the references intact until the agency and others can establish new standards of creditworthiness. The DFA strikes references to credit ratings from nationally recognized statistical rating organizations in federal regulations and inserts new text that provides that in order to satisfy these definitions a security must meet standards of credit-worthiness established by the SEC. The SEC said it was unable... Read More

Moody’s to Update Non-Agency Servicer Ratings, Include Use of GSE Performance

Moody’s Investors Service proposed a significant overhaul to ratings for non-agency MBS servicers late last week. Among other new metrics, the rating service is planning to incorporate performance data from mortgages serviced for the government-sponsored enterprises. Currently, servicers submit loan-level portfolio data to Moody’s as part of the rating service’s “servicer quality assessments.” The data would be augmented with data from securitization trusts, which is available more quickly, as well as GSE performance data “as needed.” Data from securitization trusts will receive... Read More

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