Freddie Mac this week announced a new class of single-family MBS backed by mortgages previously repurchased from MBS because they were in serious delinquency. Both government-sponsored enterprises began aggressively buying seriously delinquent loans out of their MBS trusts at the beginning of 2010 because new accounting rules required them to consolidate all their outstanding MBS on their balance sheets. Buying the distressed loans out of the MBS trusts had no impact on their financial accounting, but it allowed them to better manage...

Four years after the credit crisis, analysts at Fitch Ratings expect eventual losses from structured finance transactions to soar from current levels, about $94 billion, or 2.7 percent of the original balance of rated transactions, to $376 billion, or 10.6 percent, by the time the dust settles. And the primary culprit, of course, is residential MBS. “Fitch expects a further 9,754 tranches to not recover their full principal, representing 33 percent of all tranches and increasing the proportion of tranches with realized or expected losses to 63 percent of the total...

Fannie Mae and Freddie Mac lost a combined $9.2 billion during the third quarter – mostly due to writedowns on derivatives transactions – while the two government-sponsored enterprises continued to watch their massive MBS holdings decline. As of the end of September, Fannie and Freddie held a combined $754.54 billion of MBS in their retained portfolios, down 1.1 percent from the second quarter and a decline of 7.4 percent from the same July through September period last year. Fannie’s holdings of non-agency MBS fell 2.2 percent to $77.1 billion during... (Includes one data chart)

Recent non-agency mortgage loan modifications are showing better results compared to earlier private-label modifications despite a continued slowdown in new modification activity, according to a new Fitch Ratings analysis. While the number of completed modifications dropped, transactions completed in the past 18-24 months have improved slightly over earlier programs as a result of standardized guidelines, the recent Fitch report said. Patterned on the Home Affordable Modification Program, the standardized guidelines helped to focus attention on creating more sustainable modifications. These features included...

New regulatory requirements – including a controversial plan to assign ratings on a rotating basis – are encouraging firms to test the traditional approaches to rating MBS and ABS, but some observers say the reliance on an issuer-pay business model will be tough to change. New rating services are coming up with new ways to assess risk with more dynamic, ongoing reviews and more sources of information, and they’re less reliant on being fed information, said Stephen Kudenholdt, co-chair of the capital markets practice at SNR Denton. But the expectation that the market would shift to an investor-paid model clearly hasn’t...

Not much has changed since the 2010 edition of the ABS East Conference, and the outlook for 2012 is hardly encouraging, but conference sponsor Information Management Network drew about 30 percent more participants to its annual industry gathering in Miami Beach this week. As one attendee put it, everybody at the conference was down on the market, yet nobody is buying and nobody is selling. Regulatory uncertainty continues to stymie securitization activity. The federal government still dominates the U.S. mortgage market, with little change in sight. Tepid economic growth is generating lackluster demand for...

Most of the major players in mortgage securitization support some of the new disclosures floated by the Securities and Exchange Commission in its revised shelf eligibility proposed rule – with a number of key changes and clarifications. Reflecting the investor’s perspective, the Asset Management Group of the Securities Industry and Financial Markets Association again “enthusiastically supported” the SEC’s proposal to mandate standardized disclosure at the asset level, believing that all of the asset-level data fields should be mandatory. “Well functioning markets require the disclosure of as much relevant asset-level data as...

Continued stress in the prime non-agency MBS sector, rising delinquencies and the use of a new loan-level loss model have prompted Fitch Ratings to revise loss expectations for more than 40 percent of non-agency pools backed by prime mortgage loans. A recent review of 1,154 rated transactions backed by prime collateral, consisting of approximately 15,000 bonds, caused Fitch to affirm or upgrade an estimated 58 percent of the prime non-agency MBS portfolio and to downgrade the remaining 42 percent, according to a report by the rating agency. At least 60 percent of the downgraded MBS were rated...

Fannie Mae, Freddie Mac and Ginnie Mae dominate the mortgage market as they never have before, but all three MBS agencies are committing significant resources to overhauling their systems to prepare for an uncertain future. Freddie Mac “fully gets” the idea that the company does not control its future, said Ed Haldeman, CEO at the government-sponsored enterprise, during a panel session at this week’s annual convention of the Mortgage Bankers Association. But reform proposals that feature multiple MBS securitizers funded with private capital, such as the one put forth by the MBA, look like “a pretty decent road map to the...

Prepayments increased overall in September, particularly on agency fixed-rate MBS, with faster pay-downs occurring in lower coupons, according to analyst reviews of prepayment speeds. The experts expressed surprise at unexpectedly high prepayments for recent low coupon vintages and greater weakness for higher coupons. Deutsche Bank analysts reported that speeds for 4.0 percent Fannie Mae MBS issued in 2010 and 2009 more than doubled in September compared to the previous month. Speeds for similar MBS with 4.5 percent coupons increased also as much, they noted. For example, prepayment speeds for 2010 Fannie MBS with a 4.0 percent coupon...