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Inside MBS & ABS

November 2, 2012

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Agency Single-Family MBS Issuance Slumped in October Despite Rally in Freddie Mac Production

The three-month surge in agency MBS issuance appeared to run out of steam in October, as total agency securitization of single-family mortgages dropped 11.4 percent from the previous month, according to a new market analysis and ranking by Inside MBS & ABS. The sharpest decline was in Fannie Mae issuance. The government-sponsored enterprise cranked out $58.92 billion in single-family MBS last month, down 28.4 percent from September’s volume. It marked the lowest monthly production for Fannie since April, when the GSE issued just $46.12 billion in volume. Securitization activity at Freddie Mac was... Read More

FHFA-Like Reps and Warrants Seen As Possible for Non-Agency MBS

Non-agency MBS investors, issuers and the rating services appear to favor a new framework for representations and warranties that would incorporate provisions recently established by the Federal Housing Finance Agency for Fannie Mae and Freddie Mac MBS. The new agency framework includes standardized provisions with three-year sunsets for certain repurchase obligations. At the ABS East conference sponsored by Information Management Network in Miami last week, Rebecca Dorian, head of non-agency MBS and ABS trading at Morgan Stanley, said the FHFA’s rep and warrant framework could be scaled for the non-agency market. In fact, she said such standardization is necessary for non-agency MBS. Rep and warrant provisions in pooling and servicing agreements on outstanding non-agency MBS vary... Read More

SEC Backs FINRA Plan to Expand TRACE Reporting of MBS Trades, SBA-Backed ABS

The Securities and Exchange Commission last week approved a proposal from the Financial Industry Regulatory Authority to increase transparency regarding MBS and ABS trading. Hearing no public comments after it announced the proposal in September, the SEC agreed to FINRA’s plan to establish public reporting of trading in specified government-backed mortgage bonds and securities backed by Small Business Administration loans. According to the SEC notice published Oct. 23, the plan would leverage... Read More

SEC May Report Soon on ‘Inherent Conflicts’ In Issuer-Pay Credit Ratings Model

The Securities and Exchange Commission’s overdue “Franken amendment” study will be out soon and may include alternatives to the issuer-pay ratings model, the agency’s chief, Mary Schapiro, said last week at the annual meeting of the Securities Industry and Financial Markets Association. “The issuer-pay model has inherent conflicts in it,” Schapiro said, referring to the prevailing system in which securities issuers generally pay to obtain ratings from the credit rating services. The SEC head provided no additional specifics regarding the alternatives that might be featured in the agency’s pending report. The Franken amendment study is... Read More

Serious Concerns Raised About Proposed Basel III Capital Requirements for MBS Holdings

Basel III capital requirements proposed by federal regulators will have a significant negative impact on U.S. bank holdings of agency and non-agency MBS, according to industry participants. The capital requirements have yet to be finalized and are currently scheduled to begin being phased in Jan. 1 with full implementation in 2018. In June, the Federal Deposit Insurance Corp., the Federal Reserve and the Office of the Comptroller of the Currency proposed rules to implement Basel III capital standards – the most comprehensive overhaul of the U.S. bank capital framework since Basel I was implemented in 1989. Comments were due last week, and strong warnings were submitted by trade groups representing MBS market participants, banks and mortgage lenders. “If the Basel III [proposed rule] were implemented... Read More

Romney’s Perceived Opposition to Forgiveness of Principal Would Favor MBS Market, Analysts Say

A win by Republican presidential contender Mitt Romney should benefit the MBS market more than an Obama reelection because it would reduce the chances of revisiting principal forgiveness for underwater borrowers, according to analysts. Knowing little about Romney’s position about housing finance other than his intention to lower taxpayer exposure to Fannie Mae and Freddie Mac, trim the government’s real estate-owned inventory and come up with more foreclosure alternatives, Deutsche Bank analysts presume a Romney administration would oppose principal forgiveness. In the event of a second term, President Obama would likely use... Read More

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