Just as the mortgage market got a healthy dose of hope for the year ahead with the Fed's unexpected 50-basis-point cut in interest rates, league table results issued last week indicated a more level playing field for 2001's recuperating RMBS market.

In a rare upset for the residential mortgage-backed market, the entity formed by the recent merger of Credit Suisse First Boston and Donaldson, Lufkin & Jenrette toppled perennial mortgage kingpin Lehman Brothers in league-table rankings, clinching the No. 1 slot for RMBS Managers, according to Thomson Financial Securities Data.

Lehman had been the reigning king on the RMBS league-table charts for the last two years.

The results reminded observers of the crucial role that consolidation played in the MBS world in 2000, as the combination of CSFB and DLJ allowed the firm to pack just enough of a punch to end Lehman's seemingly neverending rule over the residential MBS world.

With proceeds of $23.6 billion and a market share of 17.1%, the new CSFB/DLJ edged out Lehman Brothers by less than $3 billion. Lehman, which was ranked No.2 and had a 15% market share, was followed by Bear, Stearns & Co. , which registered proceeds of $17.9 billion and a market share of 13%, according to TFSD.

"I would not count Lehman out," said one trader who acknowledged the slim margin by which CSFB led the tables.

Despite its No. 1 status, the deals underwritten by CSFB/DLJ fell far below its consolidated total of $41.2 billion the year before, reflecting the industrywide decline in MBS issuance in 2000. Lehman's underwriting volume for 2000 was $20.7 billion, compared with $37.1 billion in 1999.

"The addition of DLJ's whole-loan origination effort definitely assisted us in getting the No. 1 slot," said Matt Ruppel, the head of CSFB's mortgage trading business. "We view it as a position that we have a very good opportunity to maintain. The merger was extremely complementary and worked itself out in an additive fashion. We're in this business for the long term and our main goal is providing liquidity for our customers."

While Ruppel admitted that "Lehman's franchise is very strong," and they "have some benefit of history that we don't have," he stated that "we are positioned to challenge them."

Encouraged by the news of a cut in rates and a steepening in the Treasury curve, Ruppel said that his firm weathered the short-term difficulties of market conditions last year and is set to fare even better in a more stable environment.

"With our very broad-based mortgage presence, we expect to distance ourselves from our competition next year and maintain our focus on MBS as a core business," Ruppel said.

Interestingly, Merrill Lynch & Co. ranked No. 1 for the fourth quarter 2000, with approximately $6 billion in proceeds for the period of Sept. through Dec., followed by Bear Stearns at the No. 2 slot and UBS Warburg/PaineWebber at No. 3 for 4Q 2000.

Salomon Smith Barney, which ranked third in 1999 for RMBS, slipped to No. 5 in the year 2000, with $15.4 billion in proceeds and a market share of 11.2%, compared to a total of $33.6 billion in 1999, according to TFSD data.

Solly Takes Agency

MBS Market

While ranking fifth for overall RMBS volume underwriting in 2000, Salomon Smith Barney was No. 1 for agency-only MBS, with $13.4 billion in proceeds and 16.3% of the market share. CSFB followed closely in the agency market, with $12.8 billion, while Bear Stearns took the No. 3 slot, with $11.6 billion in proceeds.

Market players said that the continued Federal Reserve interest rate hikes, a few highly publicized collapses of subprime mortgage lenders and a lesser presence by major issuers like Freddie Mac and Fannie Mae all contributed to the poor harvest in residential MBS last year.

The industry's residential MBS underwriting volume totaled $137.9 billion in 2000, down from $257.5 billion in 1999 (not including commercial or subprime mortgages), according to TFSD.

Non-Agency Market


Lehman Brothers took over the No. 1 position for non-agency MBS underwriting, which would have been held by the consolidated version of CSFB and DLJ in 1999, according to TFSD. Lehman produced $11.2 billion in non-agency business last year, followed by CSFB/DLJ, which commanded $10.8 billion, and Merrill Lynch, which took the No. 3 non-agency slot, with $6.8 billion for 2000.

Securitizations in the prime, private-label residential mortgage market declined 23% in 2000, according to Standard & Poor's.

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