Like many other New Yorkers beaten down by an interminably hot summer, I've been praying for a change in the weather. This isn't so different from what our market's after - a shift of sorts, a new climate that invites activity. Without that, we'll stay stuck.

The latest wind blowing from Washington is hardly the thing to do the trick. As I discuss in my piece, the Dodd-Frank act will not only be a drag on issuance, it contradicts the government's stated aim in a number of ways. The rating agency liability issue alone is likely to mire the market for some time.

In his monthly column, Bill Berliner blasts the reform, arguing it will further delay the return of private-label MBS issuance. By hurting private-label issuance, the act ironically makes the market even more vulnerable to GSE dominance in the mortgage and real estate markets, an effect that no one wants, especially not the politicians.

That doesn't mean it's all about the summer doldrums. As Nora Colomer points out in the cover story, ABS action in Europe is gaining steam and banks are anticipating more business by picking up new hires. But even here there are caveats: many of these teams are being built up by the skeleton crews that hung on as others were let go in the crash. And public-market issuance is still sluggish.

Moving a few steps to the East, Felipe Ossa looks at Russia and that country's efforts to breathe new life into the RMBS and mortgage covered bond markets. There are no doubt signs of renewed activity there, but in the absence of local investors willing to put hefty amounts of cash to work for the long haul, much of the action is hinging on government-directed programs and funding.

Back in the U.S., John Hintze examines how originators that used to depend on government-guaranteed FFELP in their ABS business now need to look elsewhere. And that means that regular ABS deal flow is not happening anytime soon in this space.

The issue also tackles GSE reform. Matthew Silfee in his piece covers the different proposals on the table, and why they make sense or not.

Finally, in an article on consumer ABS trading, Nora looks behind the surprisingly brisk tone and finds that Asians are getting in on the act as locals spooked by high volatility pull out.

Speaking of reigniting market anxiety, Sally Runyan details how MBS buyers quivered at the thought of another 2003 refinancing wave. The trigger? A Morgan Stanley report suggesting that a government-sponsored refinancing event will be the best way to give borrowers access to housing credit. Sure, that might be a win-win for homeowners, but it's a losing proposition for MBS investors.

 

- Karen Sibayan, Editor

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