After playing defense in 2022, investors appear to be willing to deploy capital even as the MBS and ABS markets face numerous headwinds. Attendance at this week’s SFVegas conference hit a record level.
S&P Global Ratings said that the advantages of decentralized finance securitizations, including increased transaction speeds and greater transparency, are counterbalanced by several risks in the sector. Many of the risks are inherent to the use of a blockchain, like difficulty correcting errors in registered information.
Global conflicts top of mind at SFVegas; ESG and credit risk; no housing-finance reform expected when the sun’s out; Ginnie looking to fill COO position; American Car Center’s subprime ABS under review.
The 60-day-plus delinquency rate on subprime auto ABS hit a record in December. Performance is expected to decline this year and non-investment-grade ratings could face downgrades.
SFA and others have asked the SEC to extend the comment period on a proposed rule regarding conflicts of interest in the securitization market; SFA revises TRID grid; Fitch reviews RPL MBS; new ABS with Small Business Act Section 7(a) loans.
Companies looking for financing that previously haven’t tapped the ABS market are seeing ABS issuance as an option due to changes in the broader financial market.
Delinquencies and impairments continued to increase on unsecured consumer ABS and subprime auto ABS at the end of 2022. Credit card ABS performance is holding up better.
Attorneys and structured finance trade groups are combing through the SEC’s proposed rule on conflicts of interest in ABS transactions. Some are concerned the rule might prevent actions to support liquidity or hedging.
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