Arch Bay Capital has issued a $57.4 million MBS backed by seasoned performing and delinquent subprime loans, garnering a 'AAA' rating on the bond, a sign that the private-label market could come back but only if issuers are willing to make little money on their deals.

The MBS was rated by DBRS and the end investor is a bank, said one official familiar with the transaction. Quincy Tang, senior vice president of structured finance/RMBS for DBRS, told National Mortgage News that because of the credit enhancement put on the security by Arch Bay, the investor in the 'AAA' bond will not suffer any losses unless delinquencies on the underlying loans exceed 75%, an astronomical number.

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