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Inside MBS & ABS

March 16, 2012

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FHFA Offers Timeline for Strategic Plan Edging Fannie And Freddie to a Post-GSE Secondary Mortgage Market

By the end of 2012, the Federal Housing Finance Agency will see a plan for a new mortgage securitization platform as a key component in its strategic plan for the conservatorships of the two government-sponsored enterprises, even as analysts warn that transferring credit risk from the GSEs to private investors is fraught with hazard. Late last week, the FHFA unveiled a new “conservatorship scorecard” that provides more details about the agency’s revamped strategic plan for a post-Fannie and Freddie secondary market. “It’s important to see the scorecard itself as further evidence of our commitment to the work... Read More

$34 Billion in Rep and Warrant Payouts Still Lurking For the Non-Agency Sector, Agency Demands Robust

Even though approximately $10.0 billion in non-agency representation and warranty payouts have already been included in proposed or completed settlements, another $34.0 billion in payouts are probably waiting in the wings, with Bank of America and JPMorgan facing the largest exposure by far, according to analysts at Barclays Capital. “Total payouts to non-agency investors from rep and warranty related recoveries will be $26.0 billion to $52.0 billion, using the $8.5 billion Countrywide settlement deal as a template. This corresponds to an average of 3-6 points of recoveries on non-agency securities... Read More

Investors Worry About Their MBS Holdings Under $25B Settlement

Many non-agency MBS investors are upset with the $25 billion servicing settlement involving 49 state attorneys general, eight federal agencies and the nation’s five largest servicers, the full terms of which were filed in U.S. District Court this week. Bank of America, Wells Fargo, JPMorgan Chase, Citigroup and Ally Financial will receive some credit for modifying loans they service but do not own, although several of these firms have indicated that they plan to focus their efforts on portfolio loans. The Association of Mortgage Investors said the settlement establishes a precedent under which the bad debts of... Read More

Despite Mixed Fourth Quarter Earnings, GSEs Cite Potential of New Book to Outgrow Legacy Losses

More than half of the government-sponsored enterprises’ single-family guarantee book of business during the fourth quarter of 2011 consisted of loans it had purchased or guaranteed since the start of 2009, which has prompted Fannie Mae and Freddie Mac to declare the companies’ efforts to reduce the credit losses on their legacy books of business a success so far. Freddie reported $619 million in net income during the fourth quarter, compared to a net loss of $4.4 billion during the third quarter. For the full year, the GSE reported a net loss of $5.3 billion compared to a net loss of...(Includes one data chart) Read More

February Report for Private-Label MBS Promising as Performance Improves, Re-Performing Loans Increase

The non-agency MBS market showed some spark as always-performing loans continued to improve in February and more nonperforming loans moved to the re-performing bucket, according to Amherst Securities Group’s latest analysis of the mortgage market. In its February report, Amherst said first-time defaults from the always-performing bucket dropped to 0.75 percent during the month from 0.82 percent in January. In dollar terms, new defaults constituted $4.0 billion, down from $4.4 billion the previous month, the firm reported. On a year-over-year basis, always-performing loans were down to $525.6 billion from... Read More

New FICC Guaranteed Settlement and Central Counterparty Services Proceeding After SEC OK

The Depository Trust & Clearing Corp. announced this week that its Fixed Income Clearing Corp. subsidiary will begin functioning as a new central counterparty, or CCP, designed to reduce risk and costs in the $100-trillion-a-year market for U.S. MBS, starting in April, following the Securities and Exchange Commission’s approval of the proposal. Company officials say the CCP will guarantee settlement of all matched MBS trades, which industry representatives see as a crucial step for the securities industry where the settlement of an MBS trade often does not take place until months after the trade itself was made... Read More

Supply of Residential MBS Continued to Decline In 2011 at Faster Rate Than Mortgage Contraction

The volume of residential MBS in the market fell again in the fourth quarter of 2011, sustaining a nearly constant decline that’s been underway since the midway point in 2009. A total of $6.437 trillion single-family MBS were outstanding as of the end of last year, down 1.7 percent from the third quarter. The last time there was growth in the supply of MBS was in the second quarter of last year. The major factor is the ongoing decline in the supply of home mortgages, which fell 0.5 percent in the fourth quarter and 2.2 percent over the full year in 2011. Mortgage collateral has... (Includes one data chart) Read More

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