As part of its ongoing effort to energize the market of private-label residential mortgage bonds (RMBS) the Structured Finance Industry Group (SFIG) today issued the first of a series of “Green Papers” on the topic.
These papers advance SFIG’s RMBS 3.0 initiative, which aims to create standardization among originators in a bid to restore confidence in the asset class, and by extension, bring back investors.
“The Green Papers are preliminary documents released with the aim of stimulating further debate and discussion,” SFIG said in a press release. These documents will inform a more definitive set of “White Papers.”
Apart from standardization, RMBS 3.0 seeks to find solutions to obstacles in the way of a “sustainable, scalable and fluid post-crisis RMBS market.”
One major obstacle is the reticence of investors to get involved with a product that burned many of them during the securitization boom leading up to the financial crisis.
The rapid expansion of single-family rental securitization could also be sapping the will to boost private-label RMBS.
Participants welcome more clarity to the RMBS market but some argue that measures taken since the crisis have only added to the clutter of rules without improving the quality of information.
The private-label RMBS market was singlehandedly resuscitated post-crisis by REIT Redwood Trust, which in 2010 issued about $238 million in deals. Spurred by Redwood and other originators, issuance then grew steadily until it hit $11.8 billion in 2013. But this year it’s backtracked with volumes running at about half of 2013’s pace.
It remains to be seen whether these standards will create the clarity investors are seeking instead of just increasing the clutter.
SFIG launched RMBS 3.0 in late 2013.