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Inside MBS & ABS

September 5, 2014

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SEC’s New Disclosure Rule Seen as Costly for Issuers, But Enticing Alternative May Be Unregistered Securities

Issuers of non-agency MBS and commercial MBS, among other structured finance asset classes, are set to face increased costs to comply with a rule from the Securities and Exchange Commission that increases disclosure requirements. But deals that are not issued publicly would avoid the increased costs. Last week, the SEC unanimously adopted a wide-ranging final rule known as Reg AB2, which was first proposed in 2010. By the beginning of 2017, newly issued, publicly registered non-agency MBS will have to include 270 loan-level data points disclosed via the SEC’s Electronic Data Gathering, Analysis, and Retrieval system, known as EDGAR. The required disclosures include... Read More

Agency MBS Issuance Edged Higher in August As Freddie Seized a Bigger Share of the Market

New production of agency single-family MBS increased by 6.6 percent from July to August as the midyear home-buying season continued to generate a healthy supply of new primary market originations, according to a new Inside MBS & ABS analysis. Mortgage lenders last month pushed a total of $90.95 billion of single-family MBS through the securitization programs of Fannie Mae, Freddie Mac and Ginnie Mae. It was the biggest monthly volume since September 2013, but August issuance was boosted by an unusually large volume of seasoned loans that also helped tilt the competitive landscape. Freddie saw...[Includes two data charts] Read More

SEC Issues New Rule for Credit Ratings on a Split Vote, Dissenting Commissioner Questions Legality

The rating services are set for increased oversight after the Securities and Exchange Commission approved a final rule addressing internal controls, conflicts of interest and procedures in an attempt to protect the integrity of rating methods. The SEC approved the final rule on a 3-2 vote last week, with the two Republican commissioners voicing strong opposition to provisions required by the Dodd-Frank Act. Among other issues, the final rule aims at preventing sales and marketing considerations from influencing the issuance of credit ratings on structured finance products. Under the rule, rating services are prohibited from issuing or maintaining a credit rating when a person within the rating service that participates in determining or monitoring the rating also participates in sales or marketing of a product or service of the rating service or an affiliate. The rule also targets... Read More

Banks Increase Holdings of Residential MBS In Second Quarter, Thrift Holdings Slumped

Commercial banks held $1.386 trillion of residential MBS at the end of June, marking their second consecutive quarterly gain in MBS investment, according to a new Inside MBS & ABS analysis. The 0.7 percent increase in bank MBS holdings was enough to offset a 3.5 percent drop in thrift investment in the sector. On a combined basis, banks and thrifts saw an 0.3 percent increase in residential MBS during the second quarter, though the industry remained 0.2 percent below the level set at the midway point in 2013. All of the increase came...[Includes two data charts] Read More

FHFA’s Goldman Sachs Deal Allows Firm to Recoup Losses; FDIC Too Late to Sue Deutsche, Credit Suisse

The legal settlement between Goldman Sachs and the Federal Housing Finance Agency over soured non-agency MBS sold to Fannie Mae and Freddie Mac featured an unusual buyback of the securities by the investment bank. It leaves just three big defendants left to settle or go to trial, legal observers note. Under the terms of the settlement announced Aug. 22, Goldman is required to pay $3.15 billion to repurchase securities that were the subject of the claims in the FHFA’s lawsuit. The economic value of the settlement is estimated... Read More

Ginnie ‘Eagle’ Was Once a Red Hot Item for Lenders, but New Issuer Applications are Slowing

Ever since the housing bust, mortgage bankers have coveted the Ginnie Mae “eagle,” which allows them to issue and service the agency’s MBS, but the pipeline of new applications is slowing. According to figures provided to Inside MBS & ABS, the agency had received 78 new applications through the end of July compared to 89 in fiscal 2013 and 99 the prior year. In an interview with this newsletter, Ginnie President Ted Tozer acknowledged the decline in applications, but didn’t seem all that concerned, adding: “I think we received a bunch recently.” In other words, applications could wind up... Read More

S&P Considers New Rating Criteria for Servicer- Advance MBS to Spur Activity in the Sector

Standard & Poor’s is evaluating comments on a proposal to incorporate new criteria for rating residential MBS backed by mortgage servicer-advance receivables. Issuance of servicer-advance MBS has been scarce in 2014 due to the heightened regulatory scrutiny on nonbank servicers and potential ratings volatility, leading to fewer purchases of mortgage servicing rights. So far, only one deal – a $400 million unrated servicer-advance securitization in early April – has been seen this year. But with additional clarity being provided in S&P’s proposed ratings criteria and the revised methodology getting finalized over the near term, “issuers may start feeling... Read More

Credit Unions Say Prohibition on Purchased Loans Renders NCUA Securitization Proposal Inadequate

A proposal from the National Credit Union Administration to permit covered credit unions to securitize loans they have originated – but not purchased – is widely seen as insufficient by the credit union industry because of that limitation. That’s likely to prompt the regulator to favorably revise the proposal in the coming months, industry analysts say. Back in June, the NCUA issued a proposal to authorize loan securitizations by credit unions, but only for loans originated, not purchased. It also proposed permitting the creation of special purpose vehicles (SPV) to hold the assets collateralizing the securities. Additionally, the proposal lists a number of minimum requirements and limitations on residuals and retained interests. The Credit Union National Association, in its comment letter to the agency, indicated... Read More

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