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The share of loans in Arbor's CLOs that failed to make a scheduled payment more than doubled in the fourth quarter, according to preliminary data compiled by Banco Santander SA.

But Fannie Mae and Freddie Mac conducted no private-market sales of nonperforming loans early last year as adjustments were made to the program.

Some 630 residential mortgages provide the collateral for the deal, and that includes a substantial majority, 81.0%, that the rating agencies consider to be non-prime.

A regulator claims Freedom Mortgage's bad data in 2020 violated a consent order the company signed a year earlier for intentional misrepresentations.

Most borrowers are small- and medium-sized companies that have a lot of incentive to service the debt from loans on property and casualty policies.

With tougher capital requirements looming, a number of regionals including U.S. Bancorp, Huntington and Santander are using these new instruments to share risk with nonbank investors and lighten their capital load. Experts point out the pros and cons.

Investors tightening their credit pocketbooks is creating opportunities for lenders. Firms like Värde can step into the gap, buying assets from banks and investing in fixed income.

Credit strengths include a relatively fast amortization period, which can reduce exposure to loss risks, plus a collateral pool composed of frequently used, affordable smart phones.

As a result, a robust housing market is now on the horizon, Freddie Mac chief economist Sam Khater declared.

Large and regional banks are taking different approaches to buybacks in light of the proposed new capital rules. Some plan to buy back stock at moderate levels this year, while others say they will to remain on the sidelines until there is more clarity about the reforms.