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May 4, 2009

 Past Issues

Cover Story

TALF Greases Up Auto ABS Despite Sector Troubles

Market participants remain optimistic that new deal flow will hold, despite bankruptcy fears from the Detroit Big Three and a slowdown in sales volume. For the May deadline, there are a host of issuers looking at potential deals, Jason Grohotolski, assistant vice president and analyst in the asset finance group at Moody's Investors Service, said on a conference call last month. 'There has been meaningful activity, and it looks like a healthy pipeline going forward.'

Column

Risk Mismanagement

The necessary post-mortem analyses for the financial system's collapse have begun in earnest. While some have taken to talking about Wall Street's 'stupidity,' this is an unsatisfying and ultimately counterproductive approach. Clearly, the financial crisis had numerous major and contributing causes (the true 'perfect storm'), but failures of models and analytics were key factors. Rather than think of 'models' as a singular entity, it's useful to separate them into 'consumer behavior' and 'position management' models. The first would include credit performance models, which predicted losses that were low by several orders of magnitude. The failure to correctly project credit-related losses led directly to a cascading series of problems, including the creation of entire classes of securities (such as CDOs backed by subprime subordinate bonds) that were fundamentally flawed.

ABS

The Only Game In Town

Critics can say what they want about TALF. But, as clearly demonstrated by the articles in this month's ASR, the program is still the only game in town, at least for U.S. ABS.

ABCP: Maybe a Shadow of Its Former Self, But Still Alive

Long gone are the glory days of ABCP. These days, the muted activity in the market is mostly limited to government-supported programs or restructurings. Market sources said that with things the way they are, investors can at least count on betting on a sure deal. After growing to a $1 trillion dollar market, ABCP issuance has seen less than $600 billion issued over 2008, a huge dip that Craig Shallcross, a partner at LCP Capital, said is a testament to the inability to get financing in the current market environment.

Fitch Seeks Comment on SF Counterparty Risk Proposals

Recent bank failures have cast doubt on whether existing structural mechanisms are sufficient to protect securitization transactions from the credit risk of the counterparties on which they rely. In cases where Lehman Brothers and certain Icelandic banks were a crucial counterparty, for example, existing mechanisms did not protect structured finance bondholders from downgrades and in some cases defaults. Esoteric and off-market counterparty positions have been a feature of structured finance transactions for some time.

Card ABS Withstand Legislative Changes

This past month, credit card reform has been in the spotlight. Just last Wednesday the Treasury Department released a statement showing support for credit card reform.

On to the Third Round: An Update on TALF

The effectiveness of the Term Asset-Backed Securities Loan Facility (TALF) is being questioned because of the so-called anemic interest in the program. Clearly, in terms of the numbers, this perception seems accurate. The Federal Reserve Bank of New York received only $1.7 billion of loan requests in April during the program's second round. By contrast, $4.7 billion of loan requests were made in March.

MBS

Near-Term Prepayment Outlook on Agency MBS

Refinancing response has been relatively muted relative to the historically low mortgage rate levels that the market has been seeing lately. The Mortgage Bankers Association's Refinance Index in the week ending April 17 was at 6,541 with the 30-year fixed mortgage rate at 4.82%, according to Freddie Mac.

Global

Bell Bridges the Gap Between Investors and Borrowers

The European real estate market's lack of liquidity is as much a result of the disappearance of competent intermediaries as it is of the credit crisis. What the market needs, said Robert Bell, founder of Bell Capital Partners, is financiers who can, on the one hand, structure and execute financings and, on the other, coordinate groups of interested investors into syndicates that can fund these financings.

Kazakh Banks Test Future Flows: Tripped Triggers Speed Up Paydown

Among the victims claimed by the global financial crisis, a number of Kazakh banks have been particularly ravaged. Having borrowed heavily abroad and made hefty gambles on local real estate, much of the country's finance industry is flailing. This might not be a major concern for ABS players, if not for the outstanding DPR programs of three leading originators - Alliance Bank, BTA Bank and Kazkommertsbank (KKB).

Euro Governments Have No Time for TALF

The Term Asset-Backed Securities Loan Facility (TALF) has kick-started U.S. primary market issuance, but the flurry of activity won't tempt European governments to follow with a European version of TALF. Market analysts said that governments, in particular the U.K., have worked on several initiatives that separately touch upon many similar points housed under TALF. According to figures reported by Merrill Lynch, the Federal Reserve completed its second TALF funding with $1.71 billion of loans in April versus $4.71 billion of loans in the March funding.

Fewer Traumas for Italy's More Conservative Mortgage Market

Italy's more conservative approach to lending has resulted in the country's housing market withstanding the current economic environment, unlike neighboring European countries. This has also preserved the fundamentals of securitization structures. According to Fitch Ratings, Italy represents one of the most important RMBS markets in Europe, with a market share of 6% by issuance size and 9% by number of deals in 2007. During this year, RMBS continued to represent the Italian securitization market's main asset class in terms of volume and number of deals, at 64% and 48%, respectively.

Rethinking Counterparty Risk: Market Returns to the Drawing Board after Lehman Fiasco

The Lehman Brothers bankruptcy was a turning point for the securitization market as counterparty risk assumed a role more important than any investor could have ever imagined. In the aftermath, players must now rethink how to best isolate counterparty risk from a structured finance transaction.

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.