Asset Securitization Report - January 2017

Next year is shaping up to be a pivotal one for the future of the Common Securitization Platform and the issuance of the single security by Fannie Mae and Freddie Mac.

Although subprime auto lending and securitization bear similarly troubling signs to the pre-crisis housing market, they clearly do not contain the macroeconomic risks posed by the mortgage industry nearly a decade ago. But investors may still not be in the clear.

A legislative proposal would expand Fannie Mae and Freddie Mac's use of specially-created debt securities to share their risk with private investors, but such risk transfer deals are not a replacement for core capital.

Many CLO managers would welcome a repeal of the soon-to-be enforced risk-retention requirement on deals. But while he sees 5% as slight "overkill," Crestline Denali Capital executive John Thacker sees merit in having skin in the game with investors.

Last week the European arm of Pinebridge Investments refinanced the Euro-Galaxy III CLO, a collateralized loan obligation originally issued in 2013, to reprice the entire transaction, according to Standard & Poor's.