Unprecedented cooperation between numerous parties in the U.S. RMBS market is resulting in real progress towards establishing a solid framework for future private label issuance. All sides are seeking ways to repair investors’ confidence that was badly shaken several years ago. This is not to say that the substantial headwinds are over.
Better underwriting, clearer representation and warranty resolution procedures and more reliable data quality at issuance have made the credit quality of post-crisis securitizations the best in the history of the sector. Despite this, investor demand for securitizations of newly originated loans remains limited. Yield and prepayment risk are the biggest current challenges, but many investors are also seeking further structural improvements.