With a recent research report, Standard & Poor's is the latest to throw its hat into the correlation risk arena. In a special report entitled Loss Correlations Among U.S. Consumer Assets, S&P looks at both the correlation risk between asset classes and the risks posed within asset classes. S&P's analysis, aimed primarily at CDO collateral managers, focuses on four sectors of securitization markets: mortgages on property, credit cards, auto loans and manufactured housing loans. The full report is available on S&P's Web site.

Wachovia Securities recently added interest rate hedge-related data - in the form of interest rate swaps, caps or floors - to its CDO performance parameters reported in its CDO research product, Quarterly Performance Report. In addition to Wachovia's own lead managed transactions, Wachovia will also track this data for more than 300 deals not led by Wachovia Securities.

Moody's Investors Service subprime auto loan chargeoff indexes declined across the board for the reporting period ending November 2003. The All Pool Index fell 2.8% to 174.8. The High Loss Index decreased 1.7% to 222.7 and the Low Loss Index dropped 3.4% to 104.1. Four outstanding transactions were removed from the index, while five new transactions were added. The indexes track cumulative chargeoffs adjusted for seasoning, and they declined primarily due to the changes in index composition.

Net interest margin ABS performance remained strong in 4Q03, according to Standard & Poor's. In addition to more than $2 billion in new issue volume throughout the quarter, in 45 total transactions, repayment rates came in at 21.5% ahead of original cash flow expectations. Further information can be found in the recent report, titled NIMS Quarterly Highlights: Fourth Quarter U.S. NIMS Issuance and Performance Round Out Strong 2003.

HSBC Holdings plc's pending acquisition of The Bank of Bermuda was approved last Wednesday by a 91% margin. The merger is expected to lead to Bermuda becoming a leading offshore outpost for securitization and derivatives activity, something actively pitched by Bermudan banking industry leaders at the recent ABS West conference in Phoenix, Ariz.

Fannie Mae recently commissioned a report looking at the Federal Reserve's study on the GSEs' benefit to homeowners, reported ASR sister publication American Banker. The author of the report wrote that "the results in the study may well be seriously flawed, and should be subjected to extensive scrutiny before being used as a guide to the magnitude of Fannie Mae and Freddie Mac's impact on conforming mortgage rates." The Fed's study found homeowners received very little benefit of reduced mortgage rates and savings as a result of the GSEs.

Computer Science Holdings Corp. has purchased default management utility provider EarlyResolution from Freddie Mac for an undisclosed sum. EarlyResolution was started by Freddie in 2000 to help mortgage servicers find effective solutions when borrowers are in default, to lower collection costs associated with defaults and to enable more borrowers to keep their homes when facing potential foreclosure. Among others, the service is used by Wells Fargo, Chase Home Mortgage, Indy Mac, National City Mortgage, Bank of America Mortgage and Greenpoint Bank.

The U.S. Senate Banking Committee said last week that Federal Reserve Chairman Alan Greenspan will testify before the panel this Tuesday. The hearing will be on proposals for increasing regulatory scrutiny of GSEs Fannie Mae and Freddie Mac. Greenspan's testimony is scheduled to begin at 10 a.m. EST.

The February Housing Market Index (HMI), published by the National Association of Home Builders (NAHB), dropped four points to 65. A report from Friedman Billings Ramsey said the decrease was primarily caused by severe weather conditions. Despite the fact that the NAHB adjusts HMI seasonally, extreme weather conditions could still impact the final index results.

Fannie Mae Chief Economist David Berson increased his 2004 mortgage origination and debt outstanding estimates. Berson now predicts home sales to be about equal to last year's record levels, with new sales pegged at 1.08 million units and existing sales at 6.04 million units. If mortgage rates remain low for an additional two weeks, Fannie may further increase projections for home sales to new records within the next two months. Lower mortgage rates should also push refinance activity, specifically cash-out refis.

The Commerce Department reported last week that single-family housing starts for the month of January plunged 7.9% after setting 20-year highs in November and December. Single-family starts dropped to a seasonally adjusted annual rate of 1.537 million units, from December's revised 2.067 million units. Also, issuance of building permits was down 2.8% from December to an adjusted rate of 1.899 million units. Analysts said that even though both figures are down some from recent record highs, both numbers are still quite strong.

"Anecdotal evidence suggests that demand for homes has been vigorous so far in 2004 and that builders will crank up their activity as soon as the weather allows," said researchers at RBS Greenwich Capital.

Electronics retailer Circuit City's recent announcement that it plans to close 19 of its superstore formats should have a minimal impact on the more than 100 CMBS transactions its stores back. Merrill Lynch analysts have identified four transactions that have exposure to the specific store closures; however, the exposure in each is relatively small, according to a report. Merrill noted that Circuit City has not declared bankruptcy or rejected any leases. Furthermore, it expects to open 65 to 70 new supertstore formats this year, some of which will be relocations. "The risk to the loans and to the locations with a Circuit City closing is the loss of foot traffic if the store is replaced by a weaker tenant or allowed to go dark," noted analysts.

United Financial Mortgage Corp. and Troon Management Corp. announced a joint venture, named First Family Title LLC, entering the title insurance market. First Family Title, however, will only be offering its services in Illinois in the near term.


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