BMO Capital Markets is looking to add seven or eight associates and junior vice presidents to its securitization group, after seven executives, led by Pete Walsh, former co-head of origination and structuring, left to start the structured finance asset management firm Six Degrees Capital Management (see p.1). Forty-five professionals made up the securitization group before the eight ABS professionals announced their departures in late January. At press time, the investment bank had made offers to four candidates, who are expected to start at the bank between the latter half of February and the first week of March. Dave Kucera, who was co-head of origination and structuring with Walsh, now solely oversees that operation.
Mexico's BBVA Bancomer has decided it can no longer resist the vibrant MBS market. The investment bank has poached housing finance maven Luis Enrique de la Pena from Fitch Ratings' Monterrey office in a bid to grab a piece of this proliferating asset class. De la Pena will hold the title of vice president and relocate to Mexico City, where he will report to Adolfo Osorio, BBVA's head of Mexican structured finance. Osorio and his colleagues have so far stuck to infrastructure, arranging deals for toll road operators. Real estate has been De la Pena's province for the last five years at Fitch, where he rated transactions backed by construction bridge loans and mortgages. He joined Fitch five years ago, fresh from local university Instituto Tecnologico de Monterrey. With his new hire, Osorio said the shop also aims to move more aggressively into asset classes apart from mortgages and toll road financing.
PMI Mortgage Insurance Co., a subsidiary of The PMI Group, promoted Jan Walker to senior vice president, specializing in structured transactions and structured product development. In her new role, Walker will be responsible for managing a sector of the company's growing business, creating and delivering structured finance solutions for ABS and MBS markets. Prior to joining PMI in 1995, Walker worked in the secondary and capital markets with companies such as First Nationwide Bank and North American Mortgage Co.
Bill Moss, who led the banking and property division at Macquarie Bank Ltd. for 22 years, will step down for personal reasons. Moss established Macquarie's property business in 1984 and the business now owns real estate assets across the globe. Last year, Moss, who has battled muscular dystrophy for over 20 years, launched Australia's first wheelchair-accessible taxi fleet with the help of two others. In the wake of this announcement, Stephen Girdis and Tony Gill have been named as the heads of the real estate and banking and securitization groups. Moss's resignation takes effect on March 30 and his position will not be filled.
XL Capital Assurance appointed Kieran McShane as head of fixed-income investor relations. He will serve as a liaison between XLCA and investors in XLCA-insured bonds. McShane will be based in New York and will report to Francis Constantinople, head of investor relations for Security Capital Assurance, XLCA's parent company. McShane joins XLCA from Financial Security Assurance, where he spent three years as a vice president in charge of investor relations.
SunTrust Robinson Humprey is expecting at least a deal per quarter for its CDO/CLO business. The breakdown of this will probably be three CDOs - two of which are anticipated to be at half a billion dollars, one backed by mezzanine loans and the other by mid-grade collateral. The firm is also planning on a $1.5 billion, high grade CDO deal as well as a trust preferred transaction for half a billion. In terms of its CLO business, SunTrust is aiming to come to market with probably two CLOs through its Baker Street program at $400 million each this year.
The Royal Institution of Chartered Surveyors (RICS) reported that Europe's housing market continued to show solid house-price inflation in 2006 despite the interest rates hikes. Small countries are seeing the biggest house price increases, including Greece, Ireland and Scandinavia. The European Central Bank rate increases did not have much impact on the rapid growth in mortgage debt, as mortgage lending reached double digits in eight out of 12 euro-zone countries last year. RICS also highlighted that lenders did not fully pass on the interest rate hikes to custumers, as borrowing rates remained below the increases.
The adjusted price of a mortgage in most European mortgage markets fell further after 2003, according to a follow-up study published this week by Mercer Oliver Wyman, on behalf of the European Mortgage Federation (EMF). The EMF said this is a result mostly of increased lending competition and, to a lesser extent, larger loan sizes. Based on the study, mortgage margins have been squeezed the most in jurisdictions such as Germany, the Netherlands and the U.K. These are, not coincidentally, mortgage markets where structured finance plays an important role in mortgage funding, whether in the prime or nonconforming sectors. "Securitization frees up balance sheet capacity for banks and, crucially, allows nonbanks to compete," explained Deutsche Bank analysts. "This latter process of bank disintermediation - which we have often discussed - is particularly noticeable in the non-mainstream mortgage markets, of which the U.K. is the most established. Non-mainstream lenders are also proliferating in markets such as Germany, the Netherlands and Italy."
In its first yearly overview of ABS and RMBS performance, Moody's Investors Service stated that it took more rating actions on home equity-backed securities (HE) than in all other ABS and RMBS sectors in 2006. "Overall, Moody's rating actions affected a relatively small portion of home equity securities," said Moody's vice president, senior analyst Amy Tobey, author of the report. HE upgrades and downgrades each comprised about 2% of the agency's total HE ratings. Still, HE led downgrades with a total of 315 for 70% of total 2006 downgrades. This was followed by manufactured housing with 51 downgrades. According to Moody's, the downgrades in home equity was due to a mix of some structural challenges as well as some economic and performance issues. As for upgrades, the HE, jumbo/Alt-A RMBS, and auto sectors comprised most of the rating activity, making up almost 90% of upgrades.
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