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Inside MBS & ABS

May 19, 2017

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REIT MBS Holdings Grew Slightly in 1Q17, and Change in CRT Programs Could Boost It Further

Real estate investment trusts that focus on the MBS market recorded a modest increase in their MBS holdings during the first quarter of 2017, according to an Inside MBS & ABS analysis. And observers say a pending change in how Fannie Mae and Freddie Mac structure their credit-risk transfer programs may boost REIT participation further. The 15 mortgage REITs tracked by Inside MBS & ABS reported a combined $230.82 billion of MBS investment at the end of March, including assets held in the to-be-announced market. That was up 1.6 percent from the end of 2016, though it was still off from year-ago levels. Some 91.8 percent of REIT MBS holdings are...[Includes one data table] Read More

Wells Fargo Planning to Return to the Non-Agency MBS Market This Year; Chase Readies New Deal

The non-agency MBS market is set to receive a jolt as Wells Fargo plans to return to the space. “This year, one of our aspirations is to come back to the market with a couple of deals,” said Franklin Codel, a senior executive vice president of consumer lending at Wells. “We’re taking a look to make sure we can structure those properly … to try to test the market and see what we can do to bring some confidence back to the private-label market.” The official mentioned the plans late last week during an investor event hosted by Wells. Back in 2007, Wells ranked... Read More

MBS Trading Volume Declines to Lowest Level Of 2017; Rates Continue on a Downward Path

The average daily trading volume in agency MBS totaled $195.7 billion in April, the lowest reading of the year and third worst over the past 12 months, according to figures compiled by the Securities Industry and Financial Markets Association. The low trading volume is an indication that liquidity is drying up, but it also reflects a decline in new agency MBS being created. According to figures recently compiled by Inside MBS & ABS, lenders issued... Read More

Trump Tax Plan Could Help Certain RMBS And Consumer ABS, ABCP, Moody’s Says

President Trump’s tax plan would raise the federal debt, but could benefit residential MBS, consumer ABS and asset-backed commercial paper, depending mostly on the effect on the underlying obligors’ after-tax income, according to a recent research report from Moody’s Investors Service. “The administration’s blueprint proposes a reduction in the corporate tax rate to 15 percent from 35 percent, which would also apply to partnerships and other ‘pass-through’ businesses that are currently taxed through their principals’ individual returns,” analysts explained. The White House plan also features... Read More

GSEs View Front-End Credit-Risk Transfers As an Ingredient in Diversifying Transactions

Officials at Fannie Mae and Freddie Mac say pilot deals that feature added primary mortgage insurance at the front end of the securitization process are a useful addition to their credit-risk transfer programs even if their future looks somewhat limited. Speaking at a CRT conference in New York City this week, Robert Schaefer, Fannie’s vice president for credit enhancement strategy and management, called the transactions “a good tool in the toolkit,” but said he doesn’t see them taking over the majority of CRTs. Gina Healy, Freddie’s vice president of credit risk transfers, agreed... Read More

Estimated Current LTV Disclosure in STACR Deals Seen as a Leading Indicator of Mortgage Performance

A unique disclosure Freddie Mac is providing in risk-sharing transactions can help provide MBS investors with forward-looking insight about mortgage performance, according to an analysis by Kroll Bond Rating Agency. Freddie started disclosing updated loan-to-value ratios for mortgages in its Structured Agency Credit Risk transactions in March 2016. On a quarterly basis, the government-sponsored enterprise discloses the estimated current LTVs based on Home Value Explorer (HVE), its proprietary automated valuation model. Connecticut Avenue Securities risk-sharing transactions from Fannie Mae don’t include a similar disclosure. KBRA noted... Read More

Traders Agree to Settle Fraud Case with SEC; DOJ Probes Hedge Funds; Swiss Banks Settle with NCUA

The Securities and Exchange Commission this week charged two former head traders who ran the commercial MBS desk at Nomura Securities International with lying intentionally to customers to boost the profits of the firm as well as their commissions. The SEC complaint alleged that traders James Im and Kee Chan inflated the price on CMBS they bought and sold for customers on the secondary market. In certain instances, the two traders allegedly pretended they were negotiating bond purchases with a third-party seller at a higher price when Nomura had already purchased the bonds at a lower price. According to the SEC, the fraud generated... Read More

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