There's been a lot of talk about the record-breaking attendance at SFVegas 2024 in February, with estimates ranging from 8,800 to 9,100 industry professionals. Perhaps continued interest from a growing class of liquidity providers, like hedge funds and asset managers helped bolster attendance, but the event also enjoyed support from established participants, like portfolio managers, issuers, rating agencies, and quality control firms.
There was much chatter about the macro environment surrounding the securitization market. Most participants hoped the market had already seen the peak of interest rates, and anticipated rate cuts starting in the second half of 2024.
Some worry that issuers are using up valuable cash reserves on current debt service payments as they await the downward direction of interest rates.
In the meantime, interest rate assumptions continue to affect investment decisions, sparking worries that some issuers are using up valuable cash reserves on current debt service payments as they await the downward direction of interest rates.
As far as the meat and potatoes topic of dealmaking goes, attendees were bullish about specific asset classes, including second mortgages, home equity lines, non-QM and auto loans.
Consumers in focus
Consumer behavior and credit performance were high-priority topics. Despite the low unemployment rate, consumers remain under pressure from the current inflationary environment. Rising living expenses are prompting consumers to change their spending habits and increase their secured or unsecured revolving debt levels by relying more heavily on credit cards to meet living expenses.
For instance, in its conference recap of the credit card panel, Kroll Bond Rating Agency noted that consumers are expected to manage their expenses by prioritizing necessities for credit card spending. After the pandemic, panelists said, shopping online became easier, particularly with general-purpose credit cards. Now, general-purpose credit cards are not only easier to obtain, but are becoming the most popular form of payment. Given their frequent use, repaying this type of debt has moved up the consumers' payment ladder.
Interest in non-QM stays strong
Conversations around the RMBS sector, meanwhile, involved emerging supply sources instead of risks from collateral performance, said delegates from Nomura. Higher interest rates in some cases have broadened the origination market for non-QM originations, raising hopes of a possible rise in non-QM securitizations. They weighed in on the different reasons for the increased supply in the market across sectors and a possible rise in non-QM securitizations, among other topics.
Another trending subject was identifying ways for third-party service provider, who support the securitization market, to be more cost-efficient operationally and in terms of sales. This issue was a common theme with many of the RMBS participants I encountered. Most felt the need to partner with the right vendors or third-party providers.
In contrast, others felt more compelled to look at technology-type solutions and control the market timing and development in-house to remain competitive.
