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Inside MBS & ABS

June 10, 2016

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Banks Continue Fading Back in Softening Non-Mortgage ABS Market in Early 2016

Commercial banks and thrifts reported a further decline in their holdings of non-mortgage ABS during the first quarter, according to a new Inside MBS & ABS analysis of call-report data. As of the end of March, banks held a combined $131.96 billion of ABS in their portfolio, including assets intended to be held to maturity as well as those available for sale. That represented a 2.3 percent drop from the end of 2015, and a hefty 15.9 percent decline from a year ago. It was...[Includes two data tables] Read More

Fitch Says Thin Track Record Caps Rating For New Nonprime MBS Issued by Lone Star

A $161.71 million MBS planned by Lone Star Funds backed by newly originated nonprime mortgages received an A rating this week from DBRS and Fitch Ratings. The deal is the first post-crisis nonprime MBS to receive a credit rating and it will be the largest post-crisis nonprime MBS issued to date. The rating services stressed that while the mortgages originated by Lone Star’s Caliber Home Loans are generally nonprime, the underwriting on the loans is relatively strong. However, Fitch said it capped the rating at A due to the limited nonprime performance of Caliber and Hudson Americas, the asset manager for the MBS. “As more post-crisis non-prime performance is established while upholding appropriate controls, Fitch will consider... Read More

Fannie Details Types of Loans that Will be Included In New MBS Backed by Re-Performing Mortgages

Fannie Mae plans to start issuing MBS backed by single-family, fixed-rate re-performing mortgages later this year. This week, the government-sponsored enterprise detailed some of the types of loans that will be included in the planned issuance. Both loans that cured on their own and mortgages that received a modification will be eligible for the new RPL securitization program. Among other factors, the mortgages must have been performing for at least six months. Loans modified via the Home Affordable Modification Program will be eligible for the MBS along with loans modified through the GSE’s proprietary mod programs. A number of different loan types will be excluded... Read More

Jumbo MBS Issuance Resumes Even as Industry Waits for Formal Guidance on TRID from CFPB

The so-called TRID-lock seen in the jumbo MBS market since October appears to be easing as both Redwood Trust and JPMorgan Chase have come to market with deals that include some loans with compliance problems. Before this week, only one jumbo MBS included mortgages subject to TRID, a deal from Two Harbors Investment in March. Many industry participants blamed... Read More

MBS Trading Volume Hits High for the Year, But Liquidity Still a Concern. June Rate Hike in Doubt

The average daily trading volume in agency MBS climbed to $215.9 billion in May, the highest reading of the year, according to the Securities Industry and Financial Markets Association. But don’t get too excited. May’s activity is still below the two-year high established in January 2015 and nowhere near the peaks established back in 2008 when crumbling financial markets caused investors to go gaga for agency MBS. The relatively low daily trading volumes continue... Read More

Senate Lawmakers Gearing up for Fight Over Bank Capital, Liquidity Regulations

A partisan debate is brewing in the Senate over whether a more complex regulatory system could actually lead to increased systemic risk for U.S. banks even as House Republicans weigh proposals to eliminate financial and consumer protections under the Dodd-Frank Act. Discussions in the Senate Committee on Banking, Housing and Urban Affairs this week revolved around the Basel and Dodd-Frank capital and liquidity requirements and whether they are forcing big and small banks to focus more on safety and soundness instead of meeting the needs of consumers and the economy. Post-crisis financial regulations have become... Read More

CMBS Loss Severities Dip in First Quarter, But Are Still Higher Than Historical Average, Moody’s Finds

The weighted average loan loss severity for U.S. commercial MBS was 49.3 percent for the 139 loans liquidated in the first three months of 2016, versus 58.2 percent for 240 loans liquidated in the last three months of 2015, which was the highest quarterly loss severity since 2010, Moody’s Investors Service said in a new quarterly report. However, “In both quarters, severities topped the weighted average of 42.8 percent for loans liquidated between Jan. 1, 2000, and March 31, 2016,” the ratings service added. The Moody’s report tracks... Read More

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