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Inside MBS & ABS

June 14, 2013

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Former Rating Analysts Blame Management At Rating Services for Conflicts of Interest

Former rating analysts at two of the major rating services told the Securities and Exchange Commission that problems with the rating system are due to management at the rating services, not the analysts in charge of assigning ratings. “The management sets the policies, goals and corporate culture,” said David Jacob, the executive managing director of global structured finance at Standard & Poor’s from 2008 through 2011. “Management serves its firm’s shareholders, who look to maximize profit. There is nothing wrong with this. However, invariably there is potential for a conflict of interest.” In a comment letter submitted to the SEC last week, Jacob said... Read More

SEC Prompted Changes Before Approving Shellpoint’s Shelf Registration Statement

The Securities and Exchange Commission sought changes large and small before approving the non-agency MBS shelf registration statement of Shellpoint Partners in May. The scrutiny is similar to that faced by Redwood Trust when it renewed its shelf this year, showing that the SEC wants particular disclosures to accompany new non-agency MBS issuance. The back and forth between the SEC and Shellpoint started in November, when the agency sent Shellpoint initial comments on the proposed prospectus that would accompany non-agency MBS issued by the firm. The SEC requested greater disclosure and corrections to a number of issues. The SEC said... Read More

House Republicans Seek to Replace GSEs with Non-Agency Market, Many Obstacles in That Path

“As lawmakers, it is time to open up our eyes and open up our minds to alternative models and a pathway forward,” said Rep. Jeb Hensarling, R-TX, chairman of the House Financial Services Committee, at the beginning of a hearing he convened this week to consider housing finance models without explicit government guaranties. Hensarling, along with many Republicans in his committee, is angling to replace the government-sponsored enterprises with some sort of a non-agency market. However, a number of obstacles exist in that path, including the preference among Democrats and a significant portion of industry players for the GSEs’ functions to be replaced with some form of government guaranty. Most of the witnesses at the hearing provided... Read More

Agencies Drive Mortgage Securitization Rates to Record Levels in 1Q13, Timing Issues a Factor

New single-family MBS issuance accounted for a record 90.1 percent of home loan originations during the first quarter of 2013, according to a new Inside MBS & ABS analysis. An estimated $500.0 billion of new home mortgages were originated during the first three months of the year, down 4.8 percent from the fourth quarter of 2012, as refinance activity began to weaken. But mortgage securitization activity declined at a slower pace, falling just 0.6 percent in the first quarter. That pushed...[Includes one data chart] Read More

Improved Housing Data, Price Adjustments Present Attractive Investment Options in Non-Agency MBS

The recent market tumult caused by suggestions that the Federal Reserve’s quantitative easing program (QE3) may soon be tapering off is likely over, and price adjustments may have created good buying opportunities in the non-agency MBS sector, according to analysts. With less than $1 trillion in MBS still outstanding in the market, and very few higher-yield investment options around, non-agency MBS remains a good investment choice, said Bank of America Merrill Lynch analysts Chris Flanagan, Ryan Asato and Justin Borst. In their latest market analysis, the BAML researchers said... Read More

Nationstar Mortgage Prices $2 Billion of Servicing Advances, More on the Way?

Nationstar Mortgage, which has been feasting on legacy packages of mortgage servicing rights the past three years, recently priced $2 billion of asset-backed term notes and variable funding notes. The term notes are for $1 billion, as are the VFNs. The debt carries a weighted average rate of 2.10 percent and a term of three years. The notes replace $1.9 billion of existing non-agency advance facilities “and are expected to result in a reduction in rate of 1.75 percent, the nonbank servicer said. When Nationstar and other well-heeled servicers buy... Read More

Analysts: Fed Measuring Success of QE3 MBS Purchases by Job Growth, Mortgage Applications

The outlook for Federal Reserve policy and any adjustments to its $85 billion per month agency MBS buying spree depends a great deal on how the U.S. housing market evolves during the second quarter through the end of this year, according to analysts from Standard & Poor’s. Robert Keiser, vice president of Global Markets Intelligence at S&P Capital IQ, told attendees of an S&P webinar this week that all the signs point to the Fed specifically targeting housing in the third installment of its quantitative easing policy (QE3) as an instrument to stimulate economic growth. “The Fed recognizes... Read More

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