In what could quickly become a “credit negative” for the subprime auto ABS sector, a top official from the Consumer Financial Protection Bureau indicated last week that the agency is increasingly concerned about the sector and will crack down on practices deemed too risky for consumers. CFPB Deputy Director Steven Antonakes, in a speech before the Consumer Bankers Association, identified a loosening of credit in the subprime auto loan market as one of the emerging risks the bureau is paying close attention to. “From our standpoint, it is...

Concerns about how borrowers will be impacted by a change in servicers go beyond mortgages in non-agency MBS. Analysts at Moody’s Investors Service warn that the decentralized servicing models used for consumer loan ABS issued by Springleaf Holdings and OneMain Financial face significant risks in the event that servicing needs to be transferred. Both Springleaf and OneMain originate consumer loans at local branches, where they conduct certain servicing operations and collections. The decentralized model can help boost originations and loan performance, though there are risks for investors in consumer ABS with decentralized servicing. “As long as the originator maintains the customer relationship and local presence, this ‘high-touch’ model can help...

Commercial banks and thrifts reported another decline in their ABS holdings during the fourth quarter of 2014, according to a new Inside MBS & ABS analysis of call-report data. In aggregate, banks and thrifts held $159.22 billion of ABS in their held-to-maturity and available-for-sale retained portfolios as of the end of last year. That was the industry’s lowest level of ABS investment since the middle of 2012, and it represented a 3.1 percent drop from a revised third-quarter total of $164.35 billion. The biggest component in the aggregate portfolio was...[Includes two data charts]

What started as an alternative to investing in certificates of deposit has attracted interest from institutional investors and even some ABS issuance. Marketplace lending, also known as peer-to-peer lending, has strong growth prospects, according to industry analysts. Eric Rapp, a senior vice president at DBRS, estimated that $9.0 billion in marketplace loans were originated in 2014, including personal loans and financing for small business, students and real estate. “It’s still relatively small, but it’s got a fast growth trend,” he said late last week during a teleconference hosted by DBRS. Rapp said...

Industry participants and staff at the Securities and Exchange Commission continue to work on compliance with pending requirements regarding due diligence, Regulation AB and risk retention. Last week, the American Institute of Certified Public Accountants released interpretations regarding how accountants can comply with due-diligence disclosure requirements that are set to take effect June 15. MBS and ABS issued after that date that receive a rating will be required to disclose certain details about due diligence completed by third parties. Accountants have raised...

The European Commission last week requested comments on a framework for simple, transparent and standardized securitization that would apply to issuance in the European Union. A number of other non-U.S. regulators are considering similar proposals, prompting MBS and ABS participants in the U.S. to call for coordination among international regulators. The EC said its priority is to create a sustainable market for high-quality securitization without repeating the mistakes made before the financial crisis. “A high-quality EU securitization framework will promote further integration of EU financial markets, help diversify funding sources and unlock capital, making it easier for banks to lend to households and businesses,” the EC said. The European regulator stressed...

The Securities and Exchange Commission’s update to Regulation AB won’t prompt many issuers to change whether they issue deals in the public market or private market, according to industry participants. After the so-called Reg AB2 takes effect, issuers of SEC-registered MBS and ABS will have to disclose more information. The regulation includes an exemption for 144A private placements, which could provide a way for issuers to avoid the SEC’s disclosure requirements. At the recent ABS Vegas conference sponsored by the Structured Finance Industry Group and Information Management Network, many issuers indicated....

Disclosure of findings from third-party due diligence on MBS and ABS are set to go from a few paragraphs in a rating report to a detailed form with certification from the due diligence firm, thanks to standards established by the Securities and Exchange Commission. The standards take effect for deals that price June 15 or later. Within five days before the first sale in an offering that will receive a rating, the findings and conclusions of any third-party due diligence report obtained by the issuer or underwriter must be disclosed in Form ABS-15G or the rating report. The disclosure requirement applies to private placements along with SEC-registered deals. “Our biggest challenge now is educating...

Interest in the structured-finance market remains strong, but issuers continue to struggle with regulations and sometimes limited demand for their offerings. Just over 6,000 people registered for the ABS Vegas conference this week sponsored by the Structured Finance Industry Group and Information Management Network, up from more than 5,300 registrants in 2014. Jade Friedensohn, a senior vice president at IMN, said the conference set an attendance record for the structured-finance industry. A poll of attendees by the conference organizers suggested...

Standard & Poor’s emerged as the top rating service in both non-agency MBS and non-mortgage ABS securitizations in 2014, according to a new Inside MBS & ABS ranking. S&P rated $8.91 billion of non-agency MBS last year, or 25.4 percent of total issuance. Rating information is not available on most scratch-and-dent transactions and re-securitizations that are typically issued as private placements. S&P’s market share was down from 40.0 percent of non-agency MBS issued in 2013, when there were more transactions with multiple ratings. DBRS, which reports its ratings on re-securitizations, actually was involved...[Includes two data charts]