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Inside MBS & ABS

February 19, 2016

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Banks and Thrifts Up Their Stake in Residential MBS to Another Record Level in Late 2015

Commercial banks and savings institutions continued their buying spree in the MBS market during the fourth quarter of 2015, according to a new ranking and analysis by Inside MBS & ABS. Banks and thrifts held a record $1.644 trillion of residential MBS in their available-for-sale and held-to-maturity portfolios as of the end of last year. That was up 2.2 percent from the third quarter and represented a 6.8 percent gain over 12 months. All of the increase came...[Includes two data tables] Read More

The Recent (and Brutal) Downdraft in Rates May Have Caused Problems for Lenders Selling Into MBS

Mortgage originators selling loans into MBS last week likely were hit with “pair-off” fees from secondary-market investors who were expecting delivery of higher-yielding mortgages, a proposition complicated by the sudden downdraft in rates. As one secondary market executive noted: “A forward sale into an MBS is not a perfect hedge. Then again, nothing is a perfect hedge.” Originators that fund billions of dollars each quarter use... Read More

Unsatisfied With FINRA Concessions on Margin Proposal, SIFMA Warns SEC of TBA Market Harm

Secondary market participants are once again urging government regulators to revise pending margin requirements for the to-be-announced MBS market, lest they negatively disrupt the space and possibly raise the cost of providing mortgage credit. At issue is SR-FINRA-2015-036, a proposal from the Financial Industry Regulatory Authority to establish margin requirements for the TBA market under FINRA Rule 4210. Previously, the Securities Industry and Financial Markets Association urged... Read More

Ginnie Mae Will Make Full Use of Contractors, Hire Prudently to Make Limited Budget Work

The proposed fiscal year 2017 Ginnie Mae staff budget will meet current operational needs, but staffing for the long term will have to be reevaluated, according to GNMA President Ted Tozer. Tozer said the proposed agency budget of $23 million for personnel costs, “along with leveraging contractors and carefully prioritizing hires,” will meet the agency’s current needs. However, officials will take a hard look at its staffing requirements “from a long-term, strategic point of view,” he noted. Tozer was reportedly disappointed... Read More

Securitization Participants Seek Changes to Basel’s Proposal For ‘Simple, Transparent and Comparable’ Securitization

Issuers and investors involved in the securitization market are pushing the Basel Committee on Banking Supervision to revise its proposed capital standards for “simple, transparent and comparable” securitization. The BCBS issued a proposal in November and the comment period closed this month. The Structured Finance Industry Group reiterated concerns about international regulatory efforts that will create a “patchwork” of standards and limit securitization, while others pushed back on the exclusion of synthetic transactions from the proposed criteria for STC transactions. “We continue... Read More

Moody’s Details Risks Posed by Mortgage Warehouse Securitizations After Rating Deal from Jefferies

Late last week, Moody’s Investors Service published an analysis detailing risks from mortgage warehouse securitizations. The warning was published days after a $225.0 million deal from Jefferies Funding was issued with a Aaa rating from Moody’s. Analysts at Moody’s stressed that securitized mortgage warehouse facilities face risks that differ from traditional residential MBS. The analysts said Station Place Securitization Trust 2016-1 from Jefferies addressed the risks, prompting the Aaa rating. Station Place was backed... Read More

Morningstar Includes Analysis of Mortgage Insurance in New Ratings Methodologies

Morningstar Credit Ratings changed the way it rates residential MBS to allow credit for mortgage insurance. After getting a number of inquiries about the use of mortgage insurance in new MBS, the firm said it decided to enhance its methodology to provide a clearer framework for how the ratings agency approaches mortgage insurance. While mortgage insurance does not necessarily affect a borrower’s probability of default, it may decrease loss severities, according to Morningstar. “Our methodology now gives credit to mortgage insurance in some cases up to the AAA ratings level,” said Brian Grow, managing director of RMBS for Morningstar. “MI’s potential impact on default is... Read More

Trustee Seeks Payout Guidance in BofA MBS Case; Morgan Stanley Agrees to $3.2B Settlement

The Bank of New York Mellon, acting as trustee, has petitioned the New York State Supreme Court for instructions for paying out Bank of America’s $8.5 billion cash settlement with Countrywide MBS investors, which could potentially alter the order of payment, according to an analysis by Moody’s Investors Service. The governing MBS documents and the settlement agreement are complicated, nuanced and ambiguous, the rating service noted. Without guidance from the state court, BNYM, as trustee for 530 RMBS trusts, could decide on a payout that could favor certain bondholders unexpectedly. The massive payout has been delayed... Read More

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