Financial Security Assurance has named Richard Holzinger managing director of U.S. corporate finance, which encompasses the business of sureties for consumer finance, CDOs, residential mortgages and structured finance transactions. He succeeds Daniel Farrell, who has left the company. For the last six years, Holzinger has been managing director of FSA's Asian operations. That post will be filled by Michael Horn, formerly assistant general counsel in Singapore. Prior to joining FSA, Holzinger was a managing director of Bankers Trust Company in Hong Kong. That was preceded by stints at Shearson Lehman Hutton and Paine Webber Incorporated.
Emerging Issues Task Force item 03-15 was not discussed as planned at last Thursday's EITF meeting, but was deferred until January 2004. Early comments on the preparation material from industry parties made a case to the EITF that 03-15, titled "Interpretation of Constraining Conditions of a Transferee in a CBO Structure," will be impacted by the outcome of the ongoing FAS 140 amendment project.
Commercial loan sale advisor DebtX last week said it has started offering loan sale advisory services in Canada. It has also named J.D. Diabira to manage the sales effort there. Diabira was formerly from Royal Bank of Canada and the Canada Deposit Insurance Corp. He was appointed director of sales responsible for cultivating relationships with large and mid-tier Canadian financial institutions.
Fortis Bank and Crown Management Ltd. both acquired a 50% share each of Belgian-based master servicer Titrisation Belge/ Belgische Effectisering (TBE). TBE now operates only in the Belgian securitization market and provides issuers with control of the financial structure of issues, oversees primary services and monitors investor reporting. The new shareholders hope to relaunch TBE and to expand its services beyond the Belgian market.
Fairbanks Capital Corp. signed a $40 million settlement agreement with federal regulators over charges of unfair mortgage payment collection practices. To settle the charges, Fairbanks will distribute $40 million to the firm's customers through a fund, published reports said. Customers had filed a class-action lawsuit against Fairbanks. The Federal Trade Commission and the U.S. Department of Housing and Urban Development announced the settlement agreement last Wednesday. The FTC will administer the fund with some input from the class-action representatives. In addition to the $40 million paid by Fairbanks, its former CEO Thomas Basmajian will have to shell out $400,000 on his own. Fairbanks said this would put an end to all outstanding lawsuits against the company.
In a report on Fairbanks, JPMorgan Securities said this is a major positive for Fairbanks and the HEL sector. Analysts predict that settlement and process improvements will lead to subsequent rating agency servicer reviews, though the timing of any possible upgrades remains uncertain. However, the liquidity premium for Fairbanks-serviced deals will narrow in anticipation of such actions. These positive developments prompted JPMorgan to reiterate its overweight of HEL subordinates, particularly higher-yielding tranches in which the perceived servicer risk has contributed to wide spreads.
By contrast, RBS Greenwich views this as the first of many challenges in store for Fairbanks, as other states are pursuing the servicer with similar charges. Though agreeing that the HUD settlement is good news, Greenwich does not believe any upgrades will result.
The Bond Market Association said that asset-backed issuance rose by 18.6 %, to $423.4 billion, up from the $357 billion issued during the same period a year ago. The BMA also said that issuance of mortgage-related securities, including both agency and non-agency passthroughs as well as CMOs, reached $2.58 trillion in the first three quarters of 2003. This figure has already surpassed the record of $2.31 trillion set for last year, with one quarter still left in the year.
In the recently released Mortgage Bankers Association Cost Study, loan originations turned out not to be a highly profitable activity for most mortgage lenders. This cost mortgage banking companies an average loss of $1,000 per loan in 2002. Servicing also resulted in a net loss of roughly $107 per loan. This isn't surprising considering the high volume of prepayment in 2002. Net marketing income, which includes the gain or loss on the sale of loans and MBS in the secondary market (combined with capitalized value of servicing rights and servicing release premiums) - as well as loan warehousing income - were the largest contributors to mortgage bankers' bottom lines in 2002.