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Inside MBS & ABS

November 23, 2016

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SFIG Offers Benchmark for Reps and Warrants on Non-Agency MBS in Effort to Improve Transparency

The latest “Green Paper” from the Structured Finance Industry Group proposes that issuers of non-agency MBS improve transparency by comparing the representations and warranties on a new issuance with a set of benchmark reps and warrants. “A substantial population of investors have very clearly stated their collective belief that the current representation-and-warranty process is neither practically useful for its intended purpose, nor scalable,” according to the fourth SFIG Green Paper aimed at reviving the non-agency MBS market. Currently, non-agency MBS issuers provide... Read More

Bank Holdings of Non-Mortgage ABS Continued to Fade, But the Market Itself Stalled in Third Quarter

Commercial bank and savings institution holdings of non-agency ABS fell again during the third quarter of 2016, marking the 11th consecutive quarterly decline in the industry’s investment in the sector, a new Inside MBS & ABS analysis of call-report data reveals. Banks and thrifts held $128.55 billion of ABS on their balance sheets at the end of September, down 1.9 percent from the previous quarter. The industry’s aggregate ABS portfolio was off 8.8 percent from the same point in 2015. The ABS market itself shrank...[Includes two data tables] Read More

AIG Looks to Increase Investments in Home Mortgages, Complete ‘Internal Securitization’ of Various Loan Types

American International Group is working to “rebalance its exposure to residential mortgages” after the company’s sale of United Guaranty, a private mortgage insurer. Douglas Dachille, an executive vice president and CIO at AIG, detailed a number of plans late last week in a presentation to investors. He said the insurance giant is structuring direct investments in residential and commercial mortgages and other whole loans. “The team is... Read More

Bayview to Issue a Non-Agency MBS Backed by Vintage Simple-Interest Mortgages, While Still Building Inventory

An affiliate of Bayview Asset Management is preparing to issue a non-agency MBS backed by nearly 5,000 vintage “daily simple-interest” mortgages, according to presale reports by DBRS and Fitch Ratings. If the deal is positively accepted by investors, there’s the potential for more issuance as Bayview is servicing a somewhat large portfolio of the loans. The planned $241.2 million Bayview Opportunity Master Fund Trust 2016-SPL1 is stocked with mortgages originated about 10 years ago. The loans – most of which have fixed interest rates – have a weighted-average interest rate of 8.926 percent. The so-called DSI mortgages differ from a standard mortgage in the calculation of interest owed by the borrower. With a standard mortgage, interest owed is calculated... Read More

Court Grants Cert in NovaStar; FHLB Claims versus RBS Dismissed; Ally Settles; Nomura/RBS to Pay Up

A U.S. district court judge in New York has certified a class of investors to move forward with mortgage-related fraud claims they have brought against three large banks. MBS investors led by plaintiff New Jersey Carpenters Health Fund sued units of Wells Fargo that were acquired from Wachovia Capital Markets, Royal Bank of Scotland and Deutsche Bank that helped underwrite $7.7 billion of MBS issued by failed subprime lender NovaStar Mortgage. The plaintiffs accused... Read More

Movement in Interest Rates Still Depends on Economic Data, Fed’s Yellen Tells Lawmakers

An increase in interest rates could take place “relatively soon,” if incoming economic data warrant it, Federal Reserve Chair Janet Yellen told members of Congress last week. Then again, maybe not. The Fed has held off... Read More

U.S. Swap Margin Posting Rules Could Impact New, Existing Structured Finance Transactions, Warns Fitch

New derivative rules requiring daily posting of two-way variation margin on affected derivatives could create uncertainties for structured finance transactions, warned Fitch Ratings in a recent analysis. U.S. banking regulators and the Commodity Futures Trading Commission have adopted the uncleared swap margin rules for covered swap entities. Specifically, registered swap dealers and all end users of derivative contracts must comply with margin collection, posting, segregation, and documentation requirements by March 1, 2017. New swaps executed after the 2017 effective date would... Read More

GSE Shareholder Case Attorney Details Plight of Fairholme in Ongoing Litigation

Fairholme Funds officials this week continued to press their case for restoring shareholder rights for private investors in Fannie Mae and Freddie Mac, expressing hope that the incoming Trump administration will be friendlier to their cause. In Fairholme Funds Inc. v. United States, et al, the plaintiffs argue that the net worth sweep imposed by the Treasury Department and Federal Housing Finance Agency was illegal and that the two government-sponsored enterprises were not in a “death spiral” at the time of the bailout as the government claims. During a conference call this week, Fairholme CEO Bruce Berkowitz said... Read More

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