Bear, Stearns & Co. Inc., one of the forefathers and innovators of residential mortgage-backed securities, is reigning supreme once again. Showing its might in the league tables, it grabbed the No. 1 slot for RMBS underwriters for the first half of 2001, according to Thomson Financial.

Bear's $27.56 billion in year-to-date MBS proceeds catapulted it to the top spot, helping it gain an 18% market share and eclipse competitors Credit Suisse First Boston and UBS Warburg.

While always a perennial contender in the MBS market and ranked highly, Bear has not seized No. 1 status for year-to-date mortgage-backeds since 1995.

Even though CSFB completed more deals during the first half 97 issues versus Bear's 73 Bear's MBS proceeds exceeded CSFB's by more than $5 billion, according to Thomson Financial.

Bear's lead is a sizeable jump from its position last year, when it ranked No. 5 for the same period and only had an 8.4% market share. CSFB was at the helm for year-to-date 2000, with $13.26 billion in proceeds, and a 21.8% market share.

Meanwhile, CSFB and UBS are neck-in-neck in the manager ranking game for 2001. CSFB completed $22.32 billion in mortgage transactions and UBS issued $21.87 billion, representing 14.6% and 14.3% in market share, respectively.

Salomon Smith Barney and Lehman Brothers filled out the fourth and fifth slots. While the difference between the proceeds of CSFB, UBS and Salomon is only about $1 billion, Salomon edged out Lehman by a little over $6 billion.

Bear's edge

Though a constant presence in the higher-end of the rankings, it has been a long while since Bear's golden days of absolute market dominance. This ascent to No. 1, therefore, may be a significant turning point.

Representatives from the company credit their success to Bear's participation in a wide swath of the MBS market.

"Our mortgage business has been a key strength of the firm since the mid- eighties," said Jeff Mayer, senior managing director and head of mortgage trading at Bear. "The success of our year-to-date underwriting experience is the result of having a significant presence in every major segment of the mortgage market, be it Agency and whole-loan CMOs, Alt-A and subprime, and various asset-backed products. We have had a distinguished presence in the securitized ARM market."

Mayer added the Bear benefits from the strong distribution capabilities which allow them to be "aggressive market makers and liquidity providers." He said that the firm's commitment to research and structuring allows them "to accept risk and provide value to our customers through the most sophisticated prepayment and loss analytics on the street."

Market participants seem to agree that Bear's prepayment modeling is an important factor in the firm's successful RMBS operations.

"Bear came out last year with a new prepayment model, which is the first loan-level model ever built, that a lot of customers have fallen in love with," said Chuck Ramsey, CEO of Mortgage Risk Assessment Corp. (MRAC) and former general partner at Bear Stearns. "Bear truly does have superior analytics; nobody in Wall Street has analytics as good as theirs. I think this contributes to the fact that they have been very successful, particularly this year, in bringing deals."However, Ramsey said that people at Bear are not in the habit of doing deals just to play the league table game. "One thing I can tell you about Bear Stearns is they don't care about the tables," Ramsey said.

The determining factor for them, Ramsey said, is whether the deal makes business sense.

"They do not do marginal deals," he noted. "The deal has to make business sense for their customers and for the company."

Ramsey said that in the past, former Bear Stearns executives would pull deals at the last hour that would have made the firm number one, just because they were not ideal transactions to undertake.

For the second quarter alone, preliminary results show that Salomon Smith Barney took the lead with $12.66 billion in proceeds, and a 16.9% market share.

Bear Stearns and UBS are closely vying for second place, with Bear maintaining a slight edge of $11.51 billion in proceeds (15.4% market share) and UBS closely following with $11.41 billion (15.2% market share).

CSFB is fourth with $9.81 billion and 13.1% market share, while Lehman ranked No. 5 with $7.42 billion in proceeds and a 9.9% market share.

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