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Inside MBS & ABS

March 7, 2014

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Agency MBS Production Hits 9-Year Low in February, Year-to-Date Issuance Off Sharply

New production of single-family MBS by Fannie Mae, Freddie Mac and Ginnie Mae fell for the tenth consecutive month in February, hitting a low that hasn’t been seen since well before the financial crisis and housing recession. The three agencies produced just $64.34 billion in single-family MBS during February, a 6.1 percent drop from the previous month, according to a new Inside MBS & ABS ranking and analysis. That was the lowest monthly agency MBS issuance since March 2005, when new issuance totaled just $64.09 billion. In those days, non-agency MBS issuance substantially exceeded agency production, and a month’s worth of new jumbo, subprime and Alt A deals ($89.41 billion in March 2005) represented about three years of new issuance in today’s market. The first two months of 2014 generated...[Includes two data charts] Read More

Credit Suisse and New Penn Team on Another Jumbo MBS, Redwood Pessimistic But Plans New Issuance

Credit Suisse late last week issued its second jumbo MBS of the year, both of which have largely consisted of mortgages from New Penn Financial. Redwood Trust is also planning to issue its first jumbo MBS of the year in the coming weeks, though officials at the real estate investment trust are pessimistic about the short-term outlook for jumbo MBS issuance. Credit Suisse’s latest jumbo MBS was a $297.4 million deal with ratings from DBRS and Standard & Poor’s. The AAA tranche had credit enhancement of 8.85 percent and no presale reports on the deal were published. Officials at Redwood have cited... Read More

California Municipalities to Issue ABS Backed by PACE Loans, Challenge from FHFA Not Much of a Concern

A coalition of California municipalities is preparing to issue a $104.40 million ABS backed by proceeds from Property Assessed Clean Energy assessments. The Federal Housing Finance Agency has raised concerns about PACE loans, but industry analysts suggest that the FHFA doesn’t pose much of a risk to the planned ABS, even though a significant portion of the PACE loans in the deal are on properties with mortgages backed by Fannie Mae and Freddie Mac. Kroll Bond Rating Agency said 31 states have passed legislation allowing municipalities to create PACE programs. The programs allow local governments to finance renewable energy and energy efficiency projects on privately-owned properties. The Home Energy Renovation Opportunity program is a PACE program that helps finance energy-efficient upgrades and improvements such as solar, heating, ventilation and air conditioning, windows, roofing and water-saving products. HERO Funding Class A Notes, Series 2014-1, is set... Read More

GSE Common Securitization Platform Has Annual Budget of (Maybe) $300 Million but No Final ‘Plans’

It’s been almost six months since the Federal Housing Finance Agency filed articles of incorporation for the entity creating the common securitization platform, but the agency continues to maintain a wall of silence on key issues related to the project, including the size of its operating budget. According to private-sector officials who have been provided certain information about the project – legally incorporated as Common Securitization Solutions LLC – the joint venture has an annual budget of between $100 million and $300 million. One former government-sponsored enterprise executive, requesting anonymity, said... Read More

House Passes Legislation Restricting Use of Eminent Domain to Deal with Foreclosures

The House of Representatives last week passed legislation addressing the use of eminent domain authority to seize and cure underwater mortgage loans as part of a municipality’s efforts to stem high foreclosure rates. By a vote of 353-65, lawmakers passed H.R. 1944, the Private Rights Protection Act, which would bar city and county governments that get federal economic-development funds from using eminent domain to seize mortgage notes from investors and unilaterally restructure the loans before selling to other investors. Included in the legislation is... Read More

Cracks in the Façade of a Once Promising Market: Securities Backed by Single-Family Rental Property

Although investors and participants initially showed a great deal of interest in the fledgling market for bonds backed by single-family rental properties, rating agencies are starting to take a closer look at the business and don’t like everything they see. “Rising U.S. home prices have pushed down rental yields in many single-family rental markets, a trend that will likely discourage some institutional investors from buying distressed properties and converting them into rental units,” according to a recent report from Moody’s Investor Service. The rating agency adds... Read More

NY Appeals Court Reinstates Assured Guaranty’s Lawsuit Against Credit Suisse, First Horizon Settles with Freddie

A New York appeals court last week revived Assured Guaranty Corp’s claims for damages in its lawsuit against Credit Suisse Group AG concerning $1.8 billion in residential MBS. New York’s Appellate Division, First Department, unanimously reversed a trial court’s decision dismissing Assured Guaranty Municipal Corp.’s claims for rescissory and consequential damages in an action against Credit Suisse. Assured filed... Read More

Uniformity, Transparency Needed to Restart Anemic Private-Label MBS Market, Says Geithner Counsel

Greater standardization and transparency is needed to overcome the impediments to growing a new issue, non-agency MBS market, according to Michael Stegman, housing finance policy adviser to Treasury Secretary Jacob Lew. In remarks this week at the JP Morgan Securitized Products Research Conference, Stegman said lack of housing finance reform, lingering distrust among non-agency securitizers, lack of product and the trauma of heavy losses have stunted the growth of the market. The lack of reform of the government-sponsored enterprises should not become... Read More

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