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Inside MBS & ABS

August 17, 2012

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Bank and Thrift MBS Holdings Decline Slightly In 2Q12, BofA Shifts to Agency Concentration

Bank and thrift holdings of residential MBS changed very little in the second quarter of 2012, although the portfolios of several of the biggest depository institution investors revealed substantial changes from the previous period. A new Inside MBS & ABS analysis of call report data showed a 1.5 percent decline in total residential MBS held by banks and thrifts during the second quarter. After hitting a record $1.634 trillion as of the end of March, banks and thrifts reported $1.610 trillion in MBS in their held-to-maturity and available-for-sale portfolios as of the end of June. Even with the decline since March, bank and thrift MBS holdings were...[Includes two data charts] Read More

Eminent Domain Mortgage Plan Finds Opposition In Chicago, But Advocates Still Proposed Program

The securities industry may be winning the battle to convince local governments not to use eminent domain to seize performing underwater mortgages from non-agency MBS pools after Chicago Mayor Rahm Emmanuel and other elected officials expressed their opposition to or reluctance about the controversial concept. “I don’t think it’s the right way to address the problem,” Emanuel told the Chicago Tribune this week after the city’s Joint Committee on Finance and Housing and Real Estate held a hearing to discuss the plan. “I think there are other places to do it. I don’t think it’s the power of the city to do, to deal with the housing issue. We have a national issue. I think we have to address the issue. I just don’t think that’s the right instrument.” Several members of the Chicago joint committee also expressed... Read More

CFPB’s Proposed Servicing Criteria Tilted Towards Consumer Protection But Ignore Investor Concerns

Secondary mortgage market participants have expressed support for the Consumer Financial Protection Bureau’s efforts to establish clear standards for mortgage servicing that would balance investor and borrower interests. Issued last week, the proposed rules focus primarily on borrower protection and are described as measures that would benefit borrowers by eliminating surprises and run-arounds. However, they do not address servicers’ conflicts of interest that result in servicer breaches, which mortgage-backed securities investors have raised in the past, and other investor complaints. Specifically, the proposed rules implement... Read More

Downgrades Expected as S&P Revises Criteria for Pre-2009 Non-Agency MBS

Standard & Poor’s announced late last week that it updated the criteria for ratings on non-agency MBS with mortgage collateral originated before 2009. The new standards are effective immediately and will result in significantly more downgrades than upgrades, according to S&P analysts. The standards update criteria for credit, cash flows and rating stability, and introduce new methods for analyzing transactions that have fewer than 100 loans remaining in the pool. Vandana Sharma, a managing director and lead analytic manager for U.S. residential MBS ratings at S&P, said the new standards reflect key market trends. “In light of the stabilization of home prices and delinquencies in the U.S. mortgage market, these criteria seek... Read More

Second Circuit Agrees to Hear UBS Americas Request To Re-Argue Motion to Dismiss FHFA MBS Lawsuit

A three-judge federal panel this week agreed to hear a rare interlocutory appeal by one of the defendants in a series of lawsuits that the Federal Housing Finance Agency has filed in connection with non-agency MBS purchased by Fannie Mae and Freddie Mac. The Second Circuit Court of Appeals accepted UBS Americas’ appeal, which had been certified by Judge Denise Cote of the U.S. District Court of New York in late June. UBS seeks to re-argue and reverse Judge Cote’s May 4 denial of the bank’s motion to dismiss on statute of limitation grounds. The FHFA sued... Read More

At Mid-Summer, Some Consumer ABS Sectors Are More Attractive Than Others, Barclays Finds

Top-tier, highly liquid consumer ABS are still attractive investments in today’s market, owing to strong technical factors and solid fundamentals, according to Barclays Capital. “Traditional consumer ABS continue to enjoy status as a safe haven asset class, especially in times of broader market volatility, and are an excellent cash surrogate for investors looking to put excess cash to work,” wrote research analyst Joseph Astorina, who cited the sector’s stable cash flow and ratings profiles, as well as consistent excess returns over swaps and Treasuries. In addition, this sector is... Read More

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