Sign up today and take advantage of member-only content — the kind of timely, cutting edge industry insight that only Structured Finance News can deliver.

• Asset Securitization Report one-month trial subscription
• StructuredFinanceNews.com one-month trial subscription
• Free e-newsletters
• Free whitepapers

March 03, 2009

Past Issues

Column

Obama's Housing Plan

President Obama recently unveiled an initiative designed to support the housing market and reduce the catastrophic number of foreclosures. While the GSE-centric plan generally represents an incremental change from earlier programs, its controversial inclusion of a proposal for bankruptcy cram-downs may ultimately aid large numbers of homeowners by increasing the number of loans that ultimately are modified. Although containing provisions designed to stimulate refinancings and stabilize the GSEs, the proposal focuses on reducing home foreclosures and facilitating large-scale loan modifications. While the Administration will release more detailed guidelines in early March, most of the provisions are similar to Bush Administration initiatives that failed to help many homeowners. In addition, the proposal ignores important attributes of the current mortgage market. For example, provisions to pay cash fees to servicers that modify loans create apparent conflicts of interest in cases where loans were packaged in securitizations. While servicers have a fiduciary responsibility to maximize the proceeds paid to securitization trusts, direct payments to servicers create incentives to modify loans even in cases where a modification might be sub-optimal. The acceptance of such payments could be grounds for investor lawsuits, and suggests that such payments are unlikely to motivate servicers to modify loans aggressively without receiving some form of legal protection. In addition, a provision that would pay 'mortgage holders' $1,500 to modify troubled loans before they become delinquent overlooks the complexities associated with securitization. MBS deals don't have one 'mortgage holder,' but rather tranches with a variety of risk profiles and interests. The plan does not recognize this fact, nor does it address issues such as how incentive payments should be divided among bondholders.

MBS

Bid for MBS Improves, Though Wide Spreads Persist

Conditions in the U.S. mortgage backed securities market have improved, but the market still has a ways to go before it regains its pre-financial crisis vigor. That said, commercial banks have been buyers of agency mortgage bonds. The better demand is evident not just in passthroughs but also in CMOS and PACs.

Lenders Face GSEs' Multifamily Shift

After several years of putting most of the multifamily mortgages they bought in their portfolios, Fannie Mae and Freddie Mac are preparing to rev up securitization of such loans. For lenders that do business with the government-sponsored enterprises, this shift in funding strategy will affect the types of mortgages that can be offered to apartment landlords. Securitization requires more standardized loan structures, forcing borrowers to give up customized terms, though in exchange they can get lower rates than those available from portfolio lenders.

Global

Ruble, Hryvnia and Tenge - Dirty Words for ABS?

Over the last several months, Russia and other countries of the Commonwealth of Independent States have engaged in protracted battles to manage the depreciation of their currencies. Some have been more successful than others, but all have fewer resources to keep the fight going than they did only late last year. This has upped the ante for a cluster of structured, existing-asset deals from Russia, Kazakhstan and Ukraine, primarily backed by mortgages and auto loans. With collateral in dollars and borrowers' income most often in local currency, an appreciating dollar is making payments harder for borrowers to honor.

2009 ­The Credit Downturn Takes Its Toll on ABS

The outlook for the securitization market in 2009 is bleak. Problems related to ABS are manifold and a recovery of the securitization market is not yet in sight. On the one hand, the future prospects of the securitization business highly depend on a stabilization of the financial industry overall. On the other hand, the credit cycle downturn will clearly test the solidity of European structured finance notes. Uncertainties related to ABS are high. An apparent example for the current market dislocation is the CLO sector - European leveraged loan CLOs are on the radar screens as undercollateralization is imminent. The European ABS market has seized up. This is mainly due to three reasons: a) the fundamental deterioration of assets, originators and investors, b) the ongoing secondary market dislocation and persisting imbalance in terms of demand and supply, which is impacting spreads and c) uncertainty related to the rapidly changing rules of the ABS game.

New Reinsurance Product Makes Way for More Euro Capital Market Deals

The reinsurance industry got some surprisingly good news last month with a new CAT bond deal pricing. There was also the announcement of a new European product promising to increase transparency and boost capital market transactions in the near term. French re-insurance company SCOR completed the first catastrophe risk insurance-linked securitization since the collapse of Lehman Brothers. The $200 million CAT bond, Atlas V, provides global reinsurer SCOR with multi-year property catastrophe coverage referencing hurricane and earthquake exposures in the U.S. and hurricane exposures in Puerto Rico. The deal is divided into three series of notes: $50 million Series 1 (rated 'B+' by Standard & Poor's), $100 million Series 2 (rated 'B+') and $50 million Series 3 (rated 'B'). The notes collectively offer blended coverage for subsequent events.

Push Underway for U.K. Loan Modifications

Little has been done by way of loan modifications in the troubled U.K. RMBS sector. Industry sources said their hands have been tied by the legal limitations of securitizations that do not allow mortgages in these pools to benefit from the modification alternatives that are now available.

Euro Players Can't Predict Market Recovery's Timing

At the American Securitization Forum's (ASF) conference last month held in Las Vegas, a survey presented in one of the panels showed that recovery for the U.S. securitization market won't happen until 2011. In Europe, where government interventions are run on a country-by-country basis and seem painfully fragmented, getting anyone to make predictions is much more difficult.

ABS Totals

ABS Totals

View the year-to-date ABS issuance totals for ABS, MBS and CMBS.

ABS Manager Rankings

ABS Manager Rankings

View the year-to-date manager rankings for the different ABS sectors, including real estate, credit cards and autos.

Scorecards

Scorecards

View the Scorecard deals featured in ASR's latest issue.

Mortgage Refi Data

Mortgage Refi Data

See results from the Mortgage Banker's Associations Refinance and Purchase Indexes as well as the weekly mortgage rates surveyed by Freddie Mac.

Whispers

Whispers

Morgan Stanley's head of European leveraged credit trading has resigned. Robert Lepone, who oversaw various teams, including high yield bonds, leveraged loans, credit default swaps and distressed debt, left Morgan Stanley's London office for personal reasons, a spokesman said. His replacement will be announced in the coming weeks, the spokesman said, declining to comment further. Lepone's departure comes less than two weeks after Joseph McManus, a vice president with Morgan Stanley's investment-grade credit products group, left to join CastleOak Securities' fixed-income sales team.