After waiting ten months, Redwood Trust issued a second Jumbo RMBS, injecting some optimism into the private-label mortgage securitization market.
But as John Hintze concludes in this month's cover story, the deal may not necessarily usher in a wave of private-label issuance - there are simply too many issues still plaguing the industry. They can all, however, be summed up in one word: uncertainty.
John says that the first source of the market's uncertainty is the undecided fate of the provision in the Dodd-Frank Act requiring issuers to retain a part of securitizations on their books.
What's more, the rating agencies have yet to sort out what makes up a triple-A security. And that makes it tough for everyone, but particularly regulated financial firms, to even look at securitization.
Of course, what will happen to Fan and Fred still has to be resolved. Bill Berliner's column this month looks at the joint Treasury/HUD report to Congress released this month, which he calls a "major disappointment" for market players who want a timely resolution to the GSEs' status.
He adds that rather than outlining a set of concrete proposals, the white paper "is a plan to create a plan," which effectively gives Congress and an undefined joint FHFA and FHA working group responsibility for GSE reform.
There are also Dodd-Frank provisions on servicing that have left a bevy of questions unanswered. One is finding a resolution to the servicer compensation issue, as Nora Colomer details in her story this month. Different people are working on different compensation models and testing which will work best. However, the market hasn't settled on a particular model yet, since there haven't been many securitizations that have put any of these models to the test.
The matter of servicer compensation - if not adequately addressed - could end up hampering competition. In this scenario, sources say, the market might end up with around six big servicers offering special servicing programs that are similar.
But despite the urgency, resolving the different issues under the Dodd-Frank Act is not an easy task. Regulators, according to American Banker's Joe Adler, are required to define around 170 new rules by July.
This has become a Herculean task, as it is becoming more and more apparent that the agencies are going to miss many of those deadlines. Several major rules, such as the retention provisions, are behind schedule and unlikely to be finalized anytime soon.
It also remains unclear what lawmakers plan to do about all these delays. As Joe points out, Congress is of little help, with scant power to force these agencies to move faster.
Meanwhile, in Argentina, concerns about inflation outweigh most other issues. But even with a heady figure of 25% a year, players think consumer ABS will perform fine this year and strong issuance will stay on track. That's partly because the economy's growing at a solid clip and unemployment is dropping, while inflation itself, coupled with negative real interest rates, is prodding Argentines to spend now. All this works in consumer ABS's favor, as long as wage growth doesn't fall behind.
- Karen Sibayan, Editor