Spurred by persistently low short-term interest rates, as well as greater-than-expected prepayment fee collections, net-interest margin securitizations totaled $1.26 billion, the second-highest total to date, according to a new report issued by Standard & Poor's. While total volume was down from 4Q02's record of more than $1.4 billion, deal size is growing, averaging $70 million per transaction, last quarter, up 55% from an average of $45 billion in 4Q02.

The report, titled "NIMS Quarterly Highlights," addresses issuance volume and performance of deals throughout the first quarter, as well as the low rates that have stimulated mortgage lending, and, in turn, NIM issuance. Additionally, S&P has scheduled a conference call to discuss its findings for Tuesday, May 20.

The number of issuers using NIM technology seems to have leveled off in the first quarter, with 13 different lenders selling a NIM, all of which had sold NIMs previously. During the fourth quarter of last year, by contrast, three issuers priced NIMs for the first time. The names that make up the bulk of supply are no surprise to anyone who follows the sector, as leading subprime lenders Option One Mortgage, Long Beach Mortgage, AmeriQuest Financial, Lehman Brothers (via its ARC and SASCO issuance vehicles), and Credit Suisse First Boston (via HEAT and HEMT vehicles). 

The concentration among this leading group is growing, as well, since 3Q00, when S&P began rating NIMs. Back then, the five aforementioned issuers accounted for roughly half of the entire market by volume. Currently the group accounts for 62%, notes S&P.

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