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Inside MBS & ABS

July 22, 2011

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Equipment, Automotive ABS Sectors Rebounding, But Risk Retention, Loan-Level Data Are Concerns

Equipment and automotive ABS issuance may flirt with new record highs this year or next as the 2008 market collapse fallout dissipates and the benefits of solid underwriting continue to accrue, some leading industry executives said this week. Equipment ABS has rebounded substantially, according to Julie Schlueter, who is responsible for issuance of structured products and unsecured bonds at Case New Holland Global, a major manufac-turer of agricultural and construction equipment, and its captive finance subsidiary, CNH Capital. In 2007, new issuance in the sector exceeded ... Read More

GAO: Future of Non-Agency MBS Market Lies In Agency Implementation of Dodd-Frank Act

Federal regulators are aiming for a delicate balance in new securitization rules that will nudge the mortgage industry toward new non-agency MBS issuance, including making sure there is enough collateral to provide a sustainable volume of new deals. The Government Accountability Office this week released a new report on the impact of the Dodd-Frank Act on the residential mortgage market, confirming the analysis by federal regulators that the proposed risk-retention rule would leave a significant share of the mortgage market outside the qualified residential mortgage definition. The GAO said that about 80 percent of ... [includes two data charts] Read More

‘Can’t Afford’ to Cut Regulator Spending On Dodd-Frank, Treasury Official Says

A year old this week, the Dodd-Frank Act remains as controversial as the day it was signed into law as critics continue trying to water down its impact by cutting funding for its implementation. Before the financial crisis, regulators weren’t properly funded to do their jobs, said Ben Bernanke, chairman of the Federal Reserve, during a hearing this week in the Senate Banking, Housing and Urban Affairs Committee. While the Dodd-Frank Act “does cover a lot” of the gaps, “quality is more important than quantity,” he said. But if money continues to be cut, it will be severely ... Read More

House Financial Committee Approves Bill Restoring Exemption of NRSRO Ratings from Expert Liability

The House Financial Services Committee this week passed legislation repealing a provision in the Dodd-Frank Wall Street Reform and Consumer Protection Act that increased the liability of credit rating agencies for ratings they provide on asset-backed securities offerings. H.R. 1539, the “Asset-Backed Market Stabilization Act of 2011,” would restore Rule 436(g) is-sued by the Securities and Exchange Commission, which exempted nationally recognized statistical rating organizations, or NRSROs, from expert liability when they provide ratings for ... Read More

Short-Term Agency MBS Picture Bleak as Moody’s, S&P Announce Possible GSE Ratings Downgrade

Regardless of whether the White House and Congress come to a debt ceiling deal before the fast approaching Aug. 2 deadline, agency MBS are in for a rough ride, experts say. Last week, Moody’s Investors Service and Standard & Poor’s lit a fire under the debt talks and sparked widespread consternation throughout the MBS arena when they announced that each may cut the U.S. credit rating two double-A within three months if there isn’t a “credible” agreement to address the U.S. debt burden. Consequently, Moody’s placed on review for possible downgrade ... Read More

Fannie Mae Addresses Reps and Warranties In Revised Single-Family MBS Prospectus

Fannie Mae this week released a revised prospectus for its single-family MBS program that updates language on non-standard collection options such as biweekly payment plans, certain hybrid ARM pools and loan eligibility. The government-sponsored enterprise also expanded its discussion of representations and warranties provisions affecting its single-family MBS. In addition to requiring sellers to repurchase mortgages that breach the reps and warranties, Fannie said it is important for investors to consider that there are other mandatory and optional cases where loans may be ... Read More

Basel Report Calls for Tougher, More Uniform Regulation of Mortgage Securities Markets

Regulators of MBS markets should use a variety of tools to address inverse incentives in securitization, encourage markets to improve transparency and increase document standardization, according to a report released by the Joint Forum of the Bank for International Settlements. In its “Report on Securitization Incentives,” BIS said incentives in securities markets were misaligned in the crisis and still are today. “The major incentives at play for originators/sponsors included funding diversification, funding cost, risk transfer ... Read More

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