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Inside MBS & ABS

June 6, 2014

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Purchase-Mortgage Volume Drives Agency MBS Production to a Slim Increase in May

Agency issuance of new single-family MBS edged up slightly from April to May, according to a new Inside MBS & ABS analysis of loan-level data. Fannie Mae, Freddie Mac and Ginnie Mae produced a combined $68.66 billion of new MBS last month, although that was only a 2.4 percent increase over April. There are some positives in the underlying data, however. First, purchase-mortgage volume increases outpaced...[Includes two data charts] Read More

A Rally Coming in MBS Prices Thanks to Rate Cut by the European Central Bank?

MBS prices fell by roughly 100 basis points this week, but the downdraft could be short-lived thanks to the European Central Bank, according to MBS analysts and other market watchers. Late this week, the ECB cut its main interest rate to a record low 15 basis points, from 25 basis points. But in an unprecedented move, it also trimmed the interest rate it pays to banks on reserves to negative 0.1 percent. The move into negative rate territory is meant... Read More

Performance of Outstanding Non-Agency MBS Expected Strong Due to Positive Economic Trends

Economic trends point to continued strong performance for outstanding non-agency MBS, according to Standard & Poor’s. “S&P expects the sector to demonstrate stable characteristics and stable rating trends,” said Jeremy Schneider, a primary credit analyst at the rating service. “Our outlook for collateral performance is strong, and our assessment of the overall sector is stable.” In a report released late last week, S&P said... Read More

SEC, Investor Concerns Are the Last QRM Hurdles; Will the Industry See a Final Rule by Year’s End?

Industry representatives and policy wonks diverge in their opinions about whether federal financial regulators will put out a final rule or another proposed final rule as the next step in the long-delayed risk-retention rule for asset securitizers. The qualified residential mortgage designation – which would exempt non-agency MBS from the five percent risk-retention requirement – has been one of the biggest controversies. According to Politico, the Securities and Exchange Commission continues to hold up a final deal because its staff thinks a minimum downpayment requirement for QRM would better protect investors. Under the latest version of the rule, the QRM definition would be synched... Read More

Experts Battle Over Administrative vs. Legislative Fixes to Bring Fannie, Freddie Out of Conservatorship

Congressional legislative action – something likely out of reach for at least the next two years – is either a part of the problem or the only solution to unraveling the final fate of Fannie Mae and Freddie Mac, according to two distinctly different schools of thought being argued this week. The rhetorical boxing match pitted Urban Institute Fellow Jim Parrott’s thesis that only a legislative fix by Congress can free the two government-sponsored enterprises from the status quo against Jim Millstein, CEO of Millstein & Co., who contends that the GSEs should emerge recapitalized from conservatorship forthwith, a feat that can and should be executed via “administrative reform.” Parrott fired... Read More

CFPB Begins to Target Individuals in Crisis-Related Actions, Lessons Learned from Enforcement Cases

The Consumer Financial Protection Bureau’s effort to go after corporate executives in connection with its financial-crisis enforcement actions so far has led to 12 cases in which individuals were named as defendants or respondents. Individuals who have been included in CFPB complaints are primarily decision-makers or a party to the consumer transaction. Under the law, they include not only providers of consumer financial products or services, but also those with managerial responsibilities and a “material” participant in the transaction. Individual accountability is... Read More

Student Loan Servicers Back in Congressional Crosshairs as Debt Mounts, Jobs Recovery Lags

The odds seem to be increasing that student loan servicers are going to face tougher legislation or regulation – or both – as members of Congress and the Consumer Financial Protection Bureau pay more attention to the sector. During a hearing this week of the Senate Banking Financial Institutions and Consumer Protection Subcommittee, Chairman Sherrod Brown, D-OH, drew a comparison between the mortgage market’s collapse and the resulting financial crisis and today’s student loan market – with an emphasis on the role of servicers in both contexts. Last year, Brown wrote... Read More

Appeals Court Rebuffs Trial Court Judge’s Rejection Of SEC-Citi MBS Deal; S&P Lawsuits Sent Back to States

A New York federal judge was out of line and beyond his discretionary authority when he rejected the Securities and Exchange Commission’s proposed $285 million settlement with Citigroup in 2011 stemming from the bank’s alleged mishandling of MBS, an appeals court ruled this week. A three-judge panel of the U.S. Second Circuit Court of Appeals vacated the district court’s order, holding that Judge Jed Rakoff of the Southern District of New York abused his discretion by applying an incorrect legal standard to his review of the settlement. Rakoff refused to accept the deal between the SEC and Citi because it did not contain an admission or denial of guilt. The appeals court held... Read More

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