CDOs/CLOs

auto ABS 10% credit card ABS 8% enterprise finance 0% equipment ABS 2% real estate ABS 71% structured settlements 0% student loan ABS 8% trade receivables 1%

Whether large or small, banks have never had a lot of financial incentive to issue student loan ABS paper, but some market players say the shifting tides of the student loan business might change that.

As second quarter earnings data from mortgage lenders began to trickle into the market last week - giving some insight for the secondary market as to how the lenders, and their loans, are faring amid a slowing housing market - results and outlooks so far seem to be a bit of a mixed bag. Perhaps because, as IndyMac Bancorp's Chairman and Chief Executive Michael Perry put it last week, "we are laying off the bulk of that credit risk into the secondary market."

Countrywide Financial Corp. plans to enter the reverse mortgage market by yearend. The mortgage giant intends to dominate the sector once it gets its feet wet, according to Countrywide's Chairman and Chief Executive Angelo Mozilo. This is a strategy that could mean a sizable increase in reverse mortgages floating about the secondary market. The Calabasas, Calif.-based lender was driven to enter the sector because of the product's growing secondary market acceptance as well as its growing pool of potential customers, who are homeowners aged 62 and higher.

The ABS market had a busy week, one wherein the home equity loan market shared the limelight with the auto loan, credit card and business loan sectors. While ABS professionals expected the market to clear up to $15 billion in deals for the week, issuers and underwriters completed about $9 billion by Thursday afternoon.

None of the big three rating agencies have downgraded any securities issued by Bayview Financial, a privately held mortgage finance company based in Miami, in light of the realization that its securitizations were rated using what was at times erroneous loan information. A senior salesperson and limited partner in charge of Bayview's residential loan acquisition sales force was fired in late March under allegations of altering credit information on loans he acquired for the company in order to earn higher commissions, according to the company. The employee primarily increased borrower credit scores, but also changed property types and occupancy codes, among other items, the firm disclosed.

In what is not likely to come as a huge surprise to CDO market participants - Fitch Ratings said last week that performance of recently issued deals can be expected to closely track that of the subprime mortgage market. As subprime mortgage lenders over the last several years scrambled to place a record number of borrowers into loans, so did CDO managers rushed to pack the subprime RMBS securities into deals.

Bear Stearns plans to bring to market in September an $884.4 million static commercial mortgage-backed resecuritized CDO. The deal, G-FORCE CDO 2006-1, is backed primarily by the refinancing of G-FORCE CDO 2003-1 and certificates from the re-real estate mortgage investment conduit G-FORCE 2005-RR2. G Funds Asset Management, which is jointly owned by Capmark Financial Group and Goff Moore Strategic Partners, is the collateral manager for the deal. LaSalle Bank is the trustee.

Following the approval of a merger by both The Security Industry Association's board and The Bond Market Association's board in June, the companies announced last week that their respective member firms have also voted overwhelming in favor of merging the two organizations to create the Securities Industry and Financial Markets Association (SIFMA). According to a recent joint press release, the SIFMA will comprise of three groups, the capital markets group, the private client group and the asset management group.

Slower issuance might characterize the U.S. ABS market, resulting in break-even numbers at best by yearend. The student loan sector, for its part, however, is well on its way to having another record-breaking year of production.