CDOs/CLOs

Accredited Home Lenders, the San Diego-based nonprime mortgage lender, closed its final securitization of first lien mortgage loans last week, a $1 billion securitization that will be its final deal in a year that saw the company shatter its yearly high for securitization volume. Accredited securitized over $3.2 billion in 2004 and Executive Vice President Ray McKewon says his goal for 2005, is to exceed that amount. "We hope to grow [our] portfolio faster than we were able to keep in 2004. [We] hope to secure more in 2005," said McKewon.

To examine the possible effects of a slowdown in home price appreciation, Citigroup Global Markets researchers recently studied a sample portfolio consisting of 75% 2/28 hybrids and 25% fixed rate MBS, with home price appreciation in 2.5% increments varying from a 10% increase to a 2.5% decrease.

At least two CDOs backed by SME collateral priced in Japan's CDO market last quarter, leading to anticipation that SME CLOs will be the busiest area of issuance for this growing Asian market place.

Deutsche Bank Securities Inc. is reportedly near closing a deal with Dallas-based Lift Financial backed by life insurance policies, according to market sources.

With long-demanded changes to Japan's Trust Law (see ASR 5/10/04) likely to be passed by legislators before year-end, banks are ready to take advantage of the changes.

The Financial Accounting Standards Board recently offered a potential loophole appendix to FIN 46 for some in securitization markets with the proposal of FIN 46 (R)-b, the staff position for which may soon be released for a 45-day comment period. FIN 46 (R)-b, offering amnesty from consolidation for parties that do not have an explicit relationship with a particular variable interest entity, will be run past a pair of industry spokesgroups, prior to being released for 45-day comment, which is expected within weeks.

Since adjusting its excess spread assumptions earlier this year, several RMBS-backed CDOs have priced sans a rating from Moody's Investors Service. While in some cases market sources noted the lack of a Moody's rating created an arbitrage opportunity, other market sources speculated that Moody's inability to rate those deals was another unintended consequence of its enhancement adjustment.

The issue of EITF 03-1 may not become much of an issue, at least for a while longer. In its most recent report, UBS said it appears EITF 03-1 has been delayed. The Financial Accounting Standards Board received a tremendous response during the public comment period that ended in October. Analysts say discussions they have had with FASB suggests the magnitude of concerns will require a re-examination, which doesn't seem likely to happen before the end of the year. UBS adds, "the issues are very difficult to resolve, and expect a long term or indefinite postponement."

The U.S. primary ABS market came to life last week to price roughly $13 billion in a pre-holiday rush. Several deals were still making the rounds as of press time Thursday. Home equity volume surged to over $10 billion, more than double last week's volume in the sector.

US Airways' recent decision to continue flying all but 36 of its 282-plane mainline fleet is good news for investors in pooled lease aircraft ABS.