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Inside MBS & ABS

April 7, 2017

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MBS & ABS Issuance Cooled in Early 2017 as Refi Swoon Hit Agency MBS Production Hard

As first quarters go, the start to 2017 was relatively strong, but total issuance was down sharply from the previous period, a new Inside MBS & ABS analysis and ranking reveals. The market produced a total of $394.08 billion of residential MBS and non-mortgage ABS during the first three months of 2017, an 18.5 percent decline from the fourth quarter of last year. Production, however, was up 23.7 percent from the same period a year ago, and it was the strongest start since the first quarter of 2013, when agency mortgage refinance activity was running white-hot. In 2017, the agency MBS sector is...[Includes three data tables] Read More

Fed Starts to Plan for Shrinking its Huge Portfolio After Inflation Breaches Key 2 Percent Threshold

For years, officials at the Federal Reserve seemed nonchalant about coming up with a final exit strategy for the U.S. central bank’s massive holdings of agency MBS and debt and Treasury Securities, currently valued at approximately $4.5 trillion. But now, in relatively short order, the prospect of the Fed beginning to reduce its holdings has become a “thing” – so much so, in fact, that officials there reportedly are starting to put together just such a plan. The likelihood of such a move suddenly got much stronger when the Commerce Department announced late last week that the personal-consumption expenditures price index rose 2.1 percent from a year ago. The Fed has been striving to achieve 2 percent inflation for at least the last five years, and now appears to have the green light it has been waiting for. According to various press reports, the Fed’s plan would entail... Read More

Santander Settles Subprime Auto ABS Issues with Two State AGs for $25.9 Million, Sets a Precedent

State attorneys general from Delaware and Massachusetts announced a $25.9 million settlement last week with Santander Consumer USA Holdings involving subprime auto ABS. The settlement relates to post-crisis activity and the AGs said it was the first settlement with state AGs relating to subprime auto loan funding. The office for Massachusetts Attorney General Maura Healey said the settlement is part of the AG’s ongoing review of securitization practices in the subprime auto market. “We found... Read More

Tobacco Settlement Revenues to Back a New $619 Million ABS; Fitch Pulls Away from Sector

Golden State Tobacco Securitization Corp. is preparing to issue a $618.8 million ABS backed by revenues from a tobacco settlement reached in 1998. Several states have issued such deals, though the sector received a blow last year when Fitch withdrew its ratings and criteria for tobacco ABS. Under the settlement with 46 states and Washington, DC, the major cigarette manufacturing companies must make payments to each state annually, in perpetuity. The payments are based on cigarette sales, among other factors. At the time of the settlement, the revenues for states were estimated to be $306.0 billion for the first 25 years of the agreement. States can issue... Read More

Invitation Homes Expects Fannie SFR Financing Will Come in 2Q17, Reports First Loss as a Public Company

Single-family rental operator Invitation Homes expects to enter into its previously announced $1 billion financing agreement with Fannie Mae sometime in the second quarter, using the net proceeds to pay down loans racked up while issuing MBS. According to an update provided in a new 10-K filing with the Securities and Exchange Commission, Invitation – which went public earlier in the year – will “repay all remaining amounts outstanding under our mortgage loan relating to the IH1 2014-1 securitization and approximately $529.0 million of our mortgage loan relating to the IH1 2014-2 securitization.” Grubstaked by The Blackstone Group, IH has been... Read More

The Many Sides of the Treasury Sweep Debate, What to Do With Fannie, Freddie Earnings in 2017

Despite rumors to the contrary, Fannie Mae and Freddie Mac forked over most of their fourth-quarter earnings to the Treasury Department at the end of March, as scheduled. But some industry insiders wonder whether the timing of future payments will be altered to reduce the likelihood that either of the government-sponsored enterprises might need another bailout. In early March, there were talks predicting, or hoping for everything from a possible suspension of the Treasury sweep to replacing the quarterly payment with an annual one. Speculation may have been fueled by uncertainty about what the Trump administration wants to do about the now eight-year-old conservatorships of the two GSEs. In 2017, Fannie and Freddie can only retain... Read More

Wells Fargo v. MBS Suits; GreenPoint Wins; Lehman Nears MBS Settlement

Wells Fargo’s legal woes are continuing after a federal judge in the U.S. District Court for the Southern District of New York last week ordered the company to face several lawsuits by institutional investors alleging MBS fraud. U.S. District Judge Katherine Polk Failla ruled that Wells Fargo must face five lawsuits by a few dozen funds that are holding the bank liable for losses incurred after the MBS they purchased lost value due to the financial crisis. The plaintiffs include... Read More

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