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Inside MBS & ABS

September 28, 2018

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Record Attendance at ABS East Conference as Investors Look for Yield in Illiquid Assets and Loose Underwriting

The ABS East conference this week had its highest attendance in the 24-year history of the event, with investors looking for MBS and ABS that offer attractive yields. Nearly 5,000 people registered to attend the conference this year, according to Jade Friedensohn, a managing director of the structured finance division of Information Management Network, which produced the event in Miami Beach. Attendance in the previous two years was dampened by a hurricane and concerns about the Zika virus ... Read More

Reps and Warrants on Expanded-Credit MBS Seen as Inadequate to Attract Major Investors

Issuance of expanded-credit MBS is booming but total volume remains relatively small as major investors continue to avoid the sector. Investors such as Blackrock and PIMCO are looking for improvements to representations and warranties, according to industry participants. Eric Kaplan, director of the housing finance program at the Milken Institute’s Center for Financial Markets, said some big investors prefer to acquire expanded-credit loans, such as non-qualified mortgages, as whole loans ... Read More

Securitization Rates Plummeted in 2Q18 as the GSEs Continue to Lag Behind Traditional Norms

The overall mortgage securitization fell sharply in the second quarter of 2018 as Fannie Mae and Freddie Mac MBS issuance failed to keep pace with a surge in conventional-conforming mortgage originations in the primary market. During the second quarter, just 65.8 percent of newly originated mortgages were pooled in MBS, down from 71.7 percent in the first three months of the year and a 70.3 percent rate for all of 2017, according to a new Inside MBS ... [Includes one data chart] Read More

DBRS Maintains Lead in Rating Non-Agency MBS, S&P Still on Top in ABS Rating Race

DBRS was the most active rating service in the non-agency MBS market during the first six months of 2018, according to a new Inside MBS & ABS analysis. DBRS rated 26 non-agency MBS totaling $14.08 billion during the first half of the year, which represented 43.5 percent of total issuance. Its market share was up 4.0 percentage points from 2017. Fitch Ratings grew its market share in rating non-agency MBS, which rose from 31.0 percent last year to ... [Includes two data charts] Read More

Fannie and Freddie Poised to Report Stellar Results For the Third Quarter and Pay Handsome Dividends

Thanks to strong MBS issuance and a favorable interest-rate picture, Fannie Mae and Freddie Mac are likely to post robust results for the third quarter, topping their earnings from the previous period, according to a new analysis from Inside MBS & ABS. Based on single-family MBS issued in July and August, Freddie likely will end the third quarter with issuance north of $83.1 billion, compared to $82.3 billion in 2Q18. Fannie is on track to issue $135.0 billion in securities, compared to $111.6 billion in ... Read More

More Competition in Non-QM Market Would Reduce Prepayment Rates, S&P Analysts Say

Increased competition in the non-qualified mortgage market could reduce interest rates paid by borrowers and slow the sector’s speedy prepayment rates, said S&P Global Ratings. Non-QM loans, the fastest growing segment of the residential MBS market, repay quickly, often within one year of origination. S&P noted the conditional prepayment rate of non-QM loans is about 35 percent, while the rate for non-agency prime jumbos ranges from 5 percent to 15 percent. “The predominant reason to ... Read More

Greatest Risks for CMBS Predominantly Tied to Weak Malls Though Exposure has Been Limited

Ongoing challenges in the retail sector are raising questions about the credit implications for some structured finance collateral, though the negative effects on the commercial MBS market appear to be limited due to a strong economy, according to a report by Moody’s Investors Service. The disruption in the U.S. retail sector has been caused by the growth of online shopping, cutthroat competition, over-expansion and inability to adapt to changing consumer demands, the report indicated ... Read More

Hearing Focuses on Sexual Harassment Claims Against FHFA Director, Alleged Retaliation from FHFA, IG

Harassment complaints filed against Federal Housing Finance Agency Director Mel Watt took center stage during a House Financial Services Committee hearing late this week in which his accuser testified that the agency, along with its inspector general, treated her unfairly. Simone Grimes began her career at the FHFA in 2010 and became a special advisor in 2015. She complained that she was not given the same benefits as her predecessor in this temporary role and was advised that Watt would ... Read More

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