When the Securities and Exchange Commission issued a final rule in August 2014 setting disclosure requirements for publicly-registered MBS and ABS, one of the outstanding provisions was whether to apply the loan-level disclosure requirements to private-placement 144A deals. More than 18 months later, it’s unclear whether the SEC will increase disclosure requirements for private placements, though industry participants expect that some action is in the works. Charles Sweet, a practice development leader at the law firm of Morgan Lewis, noted that the SEC asked the Structured Finance Industry Group to submit refreshed comments regarding the outstanding provisions included in the so-called Regulation AB2 final rule. “They are...

The development of the “deal agent” concept and the recommendations to standardize documentation are crucial to the revival of the non-agency MBS market, according to the Urban Institute. However, more work needs to be done to refine and implement the principles underlying the deal-agent concept and document standardization, said Laurie Goodman, director of the Housing Finance Policy Center at UI, in a new report. Many investors remain...

A lack of demand from investors continues to stymie efforts to revive issuance of non-agency MBS. While issuers have made concessions to potential investors, wide gaps remain in various areas. Some of the frustrations were discussed last week at the ABS Vegas conference produced by Information Management Network and the Structured Finance Industry Group. Diane Wold, a managing director at Two Harbors Investment, said that while non-agency MBS investors have repeatedly called for increased disclosure, issuers’ disclosure efforts sometimes go unnoticed. The Securities and Exchange Commission requires issuers to disclose results from third-party due diligence reviews at least five days before a non-agency MBS prices. The disclosures offer extensive loan-level details and are required for both publicly-registered deals and private ...

There’s got to be a better way for investors in non-agency MBS to communicate with each other than taking out ads in the Wall Street Journal, according to various attendees at the ABS Vegas conference produced by Information Management Network and the Structured Finance Industry Group. Owen Cyrulnik, a partner at the law firm of Grais & Ellsworth who has represented investors in buyback disputes, said non-agency MBS investors that have wanted to force buybacks have been “paralyzed” by the voting requirements in most non-agency MBS. The deals typically require a certain share of investors in an MBS – at least 25 percent of investors in many cases – to approve of actions. “It was literally impossible to find other certificate holders,” ...

Two Harbors Investment is preparing to issue a jumbo mortgage-backed security that will include loans subject to the TRID integrated disclosure rule. The deal could help resolve the so-called “TRID-lock” seen in the jumbo secondary market as industry participants try to sort out the liability posed by the controversial rule. “TRID has proved to be a very strong headwind,” Diane Wold, a managing director at Two Harbors, said last week at the ABS Vegas conference produced by ...

One of the major obstacles to increased issuance of non-agency mortgage-backed securities remains the lack of a deal agent to protect investors. Until last week, investors had not even agreed on the general responsibilities for a deal agent, suggesting that the implementation of the concept was a long way off. A working group, co-led by Alessandro Pagani, head of securitized assets at Loomis, Sayles & Company, announced principles for a deal agent last week ...

Two nonbanks with jumbo conduit operations have faced issues recently. Premium Point Investments recently announced the New Issue Opportunity Fund will no longer invest in new jumbo mortgage-backed securities from WinWater Home Mortgage. Premium Point is an asset-management firm that established WinWater in late 2013. Premium Point said the NIOF purchased approximately $3.3 billion in whole loans and invested in 10 mortgage-backed securities issued by ...

Poor underwriting, rather than the collapse of house prices, more likely caused homeowners to default on their non-agency mortgage loans – a situation that gradually worsened and subsequently caused the country’s worst financial disaster, according to a new report published by University Financial Associates. Subject to a number of caveats, the report’s findings dramatically illustrate the importance of eroding underwriting quality in non-agency mortgage-backed securities ...

A working group led by potential investors in new non-agency MBS detailed principles for the role of a deal agent this week, signifying some progress in reform efforts. However, a revival of the non-agency MBS market looks a ways off as other industry participants consider how a deal agent will actually function. “We are now at a transition point for non-agency MBS reform efforts, where some market participants can start moving from a principles-level discussion to contractual negotiations,” Monique Rollins, deputy assistant secretary at the Treasury Department, said at the ABS Vegas conference produced by Information Management Network and the Structured Finance Industry Group. The Treasury helped facilitate...

Years of warnings from securities issuers and investors about regulatory uncertainty appear to have shifted to actual consequences as liquidity in the MBS and ABS markets has declined significantly in recent months. Almost every panel session at the ABS Vegas conference produced by Information Management Network and the Structured Finance Industry Group this week included comments regarding liquidity and regulation. Daniel McGarvey, the head of U.S. asset-backed products origination at Societe Generale, noted that in recent months spreads on MBS and ABS have increased due to illiquidity. “Credit risk is not currently a driver of credit spreads,” he said. “This should be a concern for all of us in the securitization market.” Delinquencies and losses, traditional factors in liquidity, remain...