Finance

The passage of the payroll tax holiday extension in December was, in my mind, a watershed moment for the mortgage and MBS markets. For the first time, Congress instituted a tax on mortgage transactions, to be collected by Fannie Mae and Freddie Mac. In this light, the operative question for regulators and policy makers is simple: "What are we trying to accomplish?"

To understand the role private-label mortgage financing, MBS players must first wait and see what the government's next move will be. It is not that securitization is not happening. It is just that all the activity in the market is via the GSEs.

The full implementation of Basel III is still years away, but it is already impacting key areas of the securitization market such as mortgage servicing rights. The impact of its liquidity ratios on market participants will likely be felt as early as this year.

Last year, securitization players found themselves stumbling towards recovery, as new regulations and a weak economy posed one hurdle after another for deal makers.

Casting a cloud over the CMBS sector for 2012 is an overhang of about $55 billion in CMBS loans that are coming up for refinancing. Industry participants are watching to see how these loans will fare. These mortgages form part of an estimated total of $365 billion in commercial real estate-backed loans coming due in 2012, according to CMBS data provider Trepp.

Structured finance players in Latin America pushed through 2011 with few scars, especially given the turmoil pounding European markets.

The need for private capital to return to mortgage financing is a major discussion point in the future of U.S. housing. REITs are an ideal vehicle for bringing in that private capital. However, before this can occur, a couple of things need to happen, said Calvin Schnure, a mortgage market economist at the National Association of Real Estate Investment Trusts (NAREIT).

Manager Activity: Autos Book Runner Amount (US$ Mil) Rank Mkt.

According to Standard & Poor's 2012 CMBS outlook, as much as 63% of $19 billion in 2007 vintage five-year CMBS loans coming due in 2012 could fail to refinance in case borrowers are not willing to put in additional equity. The rating agency bases its estimate on the $13.3 billion of these five-year CMBS loans for which S&P has adequate net operating income data. Based on this balance, S&P expects about $7 billion to $8 billion of 2007 vintage loans to face refinancing difficulties.

In the emerging markets at the edges of Europe, 2011 did not generate much excitement for global structured finance players; many of the deals that did go cross-border were purchased by multilateral banks. This is understandable given the crisis engulfing their neighbors.

Sears Holdings Corp. announced on Dec. 27 that it is closing up to 120 Kmart & Sears full-line stores.

With major investors exiting the reverse mortgage space, originations of government-backed Home Equity Conversion Mortgages have dropped by 950 to 1,100 loans a month.

The surge in refinancings this fall pushed Fannie Mae's issuance of MBS to $63.7 billion in November, up 20% from the prior month.

Massasuchetts Mutual Life Insurance Co. has filed a lawsuit against Merrill Lynch, Deutsche Bank Securities, Goldman Sachs, JPMorgan Securities, and RBS Securities, according to the Boston Business Journal.

Federal regulators are seeking comment on a proposal that aims to lessen banks' reliance on credit ratings by proposing three methods for assessing risk on firms' trading books.

It would seem hard to defend the so-called dual-tracking of foreclosure proceedings and loan modifications.

Consumers are having a tough time qualifying for a mortgage these days, and even a federal program designed to provide financing for low- and moderate-income borrowers is winnowing out applicants with low credit scores.

Americans who are able to buy homes are putting down payments of more than 12% on average, a survey from mortgage lead generator LendingTree found this month.

Holiday retail sales gave the National Association of Credit Management's (NACM) Credit Managers' Index (CMI) a boost to a high not seen since May, but it remained below year-ago levels as many companies, including some in the mortgage space, are still in distress.

Investors behind three CDOs – Cedarwoods CRE CDO III, Concord Real Estate CDO 2006-1 and Resource Real Estate Funding CDO 2006-1 – filed a lawsuit this week to block a junior lender from exercising the fair value purchase option on the $150 million defaulted loan secured by JW Marriott Las Vegas Resort & Spa securitized in CSMC 2007-TFLA, according to a New York court filing.