I’d first like to extend my sympathy to all of you who were impacted by Hurricane Sandy.
Just a week before the hurricane hit, it would have seemed impossible that something would be able to take people’s minds off the presidential election. It’s too bad it had to be a storm of Sandy’s epic dimensions.
Reporting on the hurricane’s potential impact in the securitization world, Nora Colomer cited CoreLogic’s estimate that nearly 284,000 homes in the Mid-Atlantic region, valued at about $87 billion, were at risk of property damage. The numbers cover only the possible costs incurred by the storm surge and not the wind or rain.
Still, Fitch predicts that the bump-up in RMBS delinquency rates will be small and temporary. Direct building damage and potential economic weakness brought on by Sandy could push out CMBS spreads, but it’s unclear how long this will last or if a reconstruction spurt will spur economic activity.
Also, in his piece this month,Bill Berliner explores the impact that Hurricane Sandy will have on MBS. One of the big effects: “closings on numerous rate locks in lenders’ pipelines will be either delayed or cancelled entirely.” In addition, locks on damaged properties can’t close until repairs are completed. What does all this mean? In Bill’s opinion, more upward pressure on MBS prices.
In the covered bond market, Nora’s cover story explores what might come next after the first public (that is, non-144A) covered bond in the U.S., issued by Royal Bank of Canada. The deal opened up a whole new pool of investors for covered bonds. Analysts expect there will be more — perhaps a good deal more — but there’s uncertainty about whether Canadian banks will fuel this market given regulatory changes at home.
This month’s issue also recaps ABS East, one of the leading conferences in our industry, hosted by Information Management Network.
In his comprehensive coverage of the event, Felipe Ossa tackles a variety of topics: from the fiscal cliff to the risk of a bubble in subprime auto ABS to coaxing ABS players into more socially minded investments to the GSEs’ continued dominance in RMBS. He found that the mood was better than ABS East 2011 — aided in no small part by brisk issuance in consumer ABS. But then again, there wasn’t much room for it to get worse.
Carol Clouse, from our sister publication Leveraged Finance News, was at ABS East as well. Like Felipe, she saw reasons to be upbeat. The equity tranches for CLOs, for instance, are attracting new kinds of investors.
Finally, John Hintze examines the impact on RMBS bonds serviced by companies that are being snapped up by Ocwen Financial. The upshot:investors experiencing interest shortfalls in the securities that they own or interest that’s deferred by months, if not years.