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Inside MBS & ABS

July 1, 2016

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Securitization Market Surged Strongly in 2Q16 Across All Sectors, Despite Some Weakness in June

New issuance of U.S. residential MBS and non-mortgage ABS revved up significantly in the second quarter, a new Inside MBS & ABS analysis reveals. Based on the best available data, a total of $400.72 billion of new MBS and ABS were issued during the three-month period that ended June 30. That figure could edge slightly higher as more information about end-of-month activity becomes available. Second-quarter MBS and ABS issuance was...[Includes one data table] Read More

FHFA Provides More Details on GSE Risk- Transfer Programs, Calls for Industry Input

The Federal Housing Finance Agency this week revealed estimates of how much it costs Fannie Mae and Freddie Mac to issue their popular credit-risk transfer debt notes, as well as more information on the kinds of investors that have been buying them. In addition to a report on the existing credit-risk transfer activities of the two government-sponsored enterprises, the FHFA also formally soliciting input on further development of the program, including the ongoing interest in so-called front-end CRT options. The FHFA’s cost estimates referred... Read More

Regulators Express Anxiety About Nonbank GNMA Issuer/Servicers, Question MBS Advance Capability

At the recent invitation-only Ginnie Mae “liquidity summit” in Washington, DC, some of the nation’s top regulators – including one from the Federal Reserve – expressed their concerns about the growing market share of nonbank issuers and servicers. The focus, as might be expected, centered on the capital position of nonbanks, which pales in comparison to depositories. As one attendee told Inside MBS & ABS: “It was all about bashing the nonbanks.” This attendee, who spoke under the condition his name not be used, said... Read More

SCOTUS Refuses Case Involving Nonbanks and Preemption Of State Laws, Causing Uncertainty for Secondary Market

Pleas from the securitization industry for the Supreme Court of the United States to hear an appeal of Midland Funding v. Madden were rejected this week, prolonging uncertainty in sectors of the secondary market. SCOTUS may still consider the issue at some point going forward, according to analysts, providing hope for the industry. Richard Johns, executive director of the Structured Finance Industry Group, said the denial of certiorari for Madden will result in significant challenges for borrowers of credit cards, mortgages, auto loans and other financial products. “The injection of uncertainty into the credit markets will ultimately increase the cost of credit for all and directly impact the real economy,” he said. The Madden case involved... Read More

Fitch Updates Residential MBS Rating Criteria to Include TRID Due Diligence Grades, Deal Agents

Fitch Ratings published updated criteria this week for rating residential MBS. The new criteria include adjustments to due diligence grades relating to the Truth in Lending Act/Real Estate Settlement Procedures Act disclosure rule and evaluations of firms serving as a deal agent. Fitch said the new criteria include a “realignment” of items that prompt C grades and D grades on mortgages reviewed by third-party due diligence firms. The changes incorporate the Structured Finance Industry Group’s recently issued RMBS 3.0 TRID Compliance Review. The rating service acknowledged... Read More

SEC Approves FINRA Margin Rule With the Addition of a Mortgage Banker Exemption

Mortgage bankers that trade in the to-be-announced MBS market will be exempt from the initial margin requirements associated with the Financial Industry Regulatory Authority’s revised Rule 4210, which was approved by an order of the Securities and Exchange Commission last week. Under the rule, as amended now three times by FINRA, market participants who trade TBAs will have to post an initial “maintenance” margin of 2 percent of net position size, along with an on-going variation margin, which will be subject to a $250,000 minimum transfer amount. However, the SEC order provided... Read More

Ginnie Mae Issuers Vulnerable to SEC Enforcement Actions, Executives Exposed as Well, Attorneys Warn

The Securities and Exchange Commission’s recent $12.7 million settlement with First Mortgage Corp. and several of its top executives over an allegedly fraudulent sale of toxic MBS to investors reveals the agency’s hidden role as a regulator of Ginnie Mae issuers, attorneys at Mayer Brown warned. Though seldom in the news, the SEC continues to bring enforcement actions against public companies that commit fraud involving Ginnie MBS, as seen in the FMC case, and previous enforcement actions against Taylor Bean & Whitaker and Radius Capital, the attorneys noted in a recent analysis. When bringing these cases, the SEC seeks... Read More

Court Releases More Documents, Including Former Treasury Official Deposition, in GSE Shareholder Case

Several more court documents were released over the past week that offer additional details into the circumstances surrounding the Treasury Department’s decision to replace the quarterly dividend Fannie Mae and Freddie Mac had been paying in conservatorship with a net worth sweep. Industry observers say the new memos and deposition transcripts reinforce the notion that the government had been planning the sweep for a while before it was implemented in late 2012. The government-sponsored enterprises’ shareholders have been challenging... Read More

Falling Rates in a Post ‘Brexit’ World Lead to Rally in Agency MBS Prices; But Will Cooler Heads Send Rates Rising Again?

Since the United Kingdom voted to leave the European Union a week ago, interest rates in the U.S. have been steadily falling, causing a rally in MBS prices. According to market watchers, Fannie Mae/Freddie Mac MBS values for new securities haven’t been this good since January 2015. Meanwhile, mortgage rates touched a three-year low the past few days with some primary market lenders making new loans at 3.25 percent and no points. As Inside MBS & ABS went to press, the benchmark 10-year Treasury was yielding... Read More

Downgrades for MBS and ABS Still Relatively Limited With Few Defaults and Strong Loan Performance

Upgrades of ratings on structured finance products hit an all-time high in 2015, according to a study released this week by S&P Global Ratings. The study tracked ratings across sectors and the world, while the U.S. residential MBS sector showed mixed performance. S&P said it had 30,359 ratings outstanding on global structured finance securities at the beginning of 2015. During the year, 9.8 percent of the ratings were upgraded. The rating service said upgrades in 2015 were most prevalent on structured credit deals in Europe and the U.S. Some 11.2 percent of S&P’s ratings were downgraded... Read More

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