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Inside MBS & ABS

April 12, 2013

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ABS Market Started 2013 on Strong Footing Despite Ongoing Sluggishness in Credit Card Securitizations

A total of $47.13 billion of new non-mortgage ABS were issued during the first quarter of 2013, a solid 31.2 percent gain from the end of last year, according to a new Inside MBS & ABS analysis and ranking of issuers and underwriters. The fast start for 2013 ABS issuance was up 15.1 percent from the first three months of last year, although it came up short of three of the strongest quarters since the financial market meltdown in late 2008, including the second quarter of 2012. If new issuance can maintain its current pace for the rest of the year, 2013 could see the strongest ABS production volume since before the crash. The driver so far has been...[Includes two data charts] Read More

SEC Probes Reg AB Servicing Issues on Non-Agency MBS from Redwood Trust

In recent months, the Securities and Exchange Commission has looked into Regulation AB compliance issues regarding non-agency MBS issuance from 2010 and 2011 by Redwood Trust. The SEC questioned Redwood and others involved in the issuance regarding disclosures of servicing practices. An official at Redwood said the issue largely relates to the complicated nature of Redwood’s deals. In particular, issuance from Redwood often involves multiple servicers, each of which can be subject to Reg AB disclosure requirements. According to correspondence published this week by Redwood, the SEC first queried... Read More

Resistance by Most TBA Market Participants Hinders Realization of CCP MBS’ Full Potential

The new central counterparty for MBS trades is having a difficult time delivering results and is, in fact, experiencing a drawback because of stringent margin rules as well as other internal issues, according to financial advisory firm NewOak Capital Advisors. The regulated multilateral central counterparty trading platform for executing to-be-announced agency MBS is not at full power because most TBA participants are not doing what they are supposed to, observed Ron D’Vari, chief executive officer and co-founder of NewOak. “The key drawbacks are... Read More

MBS Private Placements May Be Gaining Momentum in 2013, Observers Say

Primary market originators and due diligence providers say the elusive market in private placement MBS deals has been gaining strength this year. “We’re seeing three to five private deals a month,” said Jeff Taylor, managing partner of Digital Risk, a New York-based risk management and due diligence firm. As for the underlying product, it’s across the board, he added. “It can be jumbo, nonperforming, and re-performing.” But the deals are also much smaller than the rapidly growing public MBS deals. Digital Risk, which conducts due diligence reviews on the underlying collateral, said... Read More

Regulatory Actions Seen as Perpetuating Dominance of Agency MBS Issuance

Decisions by federal regulators have combined to promote issuance of agency MBS over non-agency MBS, a trend that is expected to continue for years to come, according to industry analysts. Panelists at a talk this week sponsored by the American Enterprise Institute cited rules from the Consumer Financial Protection Bureau along with pending rules to set requirements for risk retention on MBS issuance and capital requirements for originations and securitization. “Until you know what the rules of the game are going to be... Read More

UBS Americas Loses Appeal to Dismiss FHFA Lawsuit; NCUA Nets MBS Settlement with Bank of America

The Federal Housing Finance Agency’s lawsuit against UBS Americas and, by extension, more than a dozen other big banks, in connection with non-agency MBS purchased by Fannie Mae and Freddie Mac will continue after a federal appeals court flatly denied UBS’ bid to dismiss the case. The Second Circuit Court of Appeals upheld a lower court ruling that denied UBS’ motion to dismiss the FHFA’s suit as time barred. In the summer of 2011, the FHFA filed 18 lawsuits in Manhattan federal court against UBS and other big banks on behalf of the GSEs, alleging violations of the federal Securities Act of 1933 for approximately $200 billion in MBS sold to Fannie and Freddie in the years prior to the mortgage market meltdown. The UBS appeal argument largely revolves... Read More

Low Balance Commercial Loans Winding Up in MBS As RAIT Financial and Others Increase Originations

RAIT Financial Trust, Philadelphia, is funding roughly $60 million to $70 million a quarter in multifamily and low-balance commercial loans, product that is winding up in MBS issued by Barclays Capital and Citigroup Securities. According to Jason Stewart, an analyst with Compass Point Research & Trading LLC, the company also has a line of credit from Credit Suisse, and is working on a $100 million to $150 million deal that could be ready by the third quarter. A publicly traded real estate investment trust, RAIT is... Read More

Poor Quality of U.S. Legacy MBS Continues to Drive Overall Downgrades, Default Rates, S&P Study Finds

Credit quality for global structured finance securities fell for the sixth consecutive year in 2012, again led by U.S. residential MBS, according to Standard & Poor’s. Looking at downgrade and default trends from 1978 through 2012, S&P found that downgrades were less pervasive last year than in previous years. Nonetheless, the mild but slow global economic recovery continues to hurt the performance of MBS and other structured finance securities for the sixth straight year. Its lagging effect means that credit quality may continue to see moderate deterioration, the rating agency said. While poor credit quality appears... Read More

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