Babson Capital Management announced a series of promotions recently. Thomas Finke, formerly president of the firm, will take the position of chairman and chief executive officer, effective Dec. 1. He will also become vice president and chief investment officer of Massachusetts Mutual Life Insurance Co. (MassMutual), Babson Capital's parent company. Finke is taking over these roles from Roger Crandall, who was named MassMutual's president and chief operating officer as of Dec. 1. He will continue to report to Crandall. Taking over for Finke is Clifford Noreen, vice chairman, who will become president in addition to his role as head of corporate securities. He will report to Finke, as will the heads of Babson Capital's other investment businesses including Efrem Marder, quantitative management; Robert Little, real estate finance group; Ian Hazelton, Babson Capital Europe; and Russell Morrison and Marcus Sowell, U.S. bank loan team. James Masur, chief financial officer and chief operating officer at Babson, will also continue to report to Finke. Finke joined Babson Capital in June 2002 as part of the company's acquisition of First Union Institutional Debt, where he was co-founder and president. Noreen joined the firm in 1985 as a private placement analyst. In 1992, he was named head of the high yield team and in 2004 became head of the public corporate credit group, later managing teams for public equity and corporate credit-related investments including public and private bonds, mezzanine and private equity investments, and structured credit products.
CWCapital Investments (CWCI) announced the hire of Hugh Hall as managing director. Hall was a founder of Gramercy Capital Corp. and served as chief operating officer until its merger with American Financial Realty Trust in April 2008. He began his career at Cadwalader, Wickersham and Taft and at Credit Suisse, and has more than 14 years of experience in the commercial mortgage industry. Hall will report to CWCI President Charles Spetka, and is charged with developing new capital sources and investment opportunities for the firm, including the creation of a third-party managed fund focused on mortgages and senior debt.
Zetabid, a firm specializing in U.S. home auctions, hired Christopher Connelly as senior managing director. Connelly is responsible for global business development at the firm. Together with the company's long-standing sales team, he will manage relationships with financial institutions across the country and gather inventory for Zetabid auctions of bank- and builder-owned homes. Before joining Zetabid, Connelly headed up National Home Auction, a national foreclosure company. Prior to that, he was a managing director at Natixis Capital Markets in New York, where he led the firm's asset securitization and finance group. During his six years at Natixis, Connelly helped the group purchase and securitize more than $20 billion of mortgage loans. He also maintained a warehouse lending book of more than $5 billion.
Moody's Investors Service has begun publishing a cross financial-sector publication called Moody's Credit Card Statement that features articles written by the rating agency's structured finance, banking and retail analysts. The newsletter focuses on credit card ABS and credit card issuers, as well as the industries affected by increasing consumer debt and delinquency rates, such as retail and banking. Topics for the first edition include: credit card remittance reports painting a grim picture, alternative sources of liquidity for card issuers and retail credit losing its luster.
Residential Capital Corp. has sold $12.7 billion in Fannie Mae-related servicing rights. The troubled firm confirmed the sale - which was first reported by ASR sister publication American Banker - but declined to say who the buyer was. "We're not giving out any more information about the sale," a spokeswoman said. GMAC Financial Services - the parent of ResCap - recently applied with the Federal Reserve to become a bank holding company, a move that may give it access to a cash infusion under the Emergency Economic Stabilization Act. The company has warned, however, that it may not receive approval from the Fed. GMAC owns a depository based in Utah. Among servicers, ResCap ranks sixth nationwide, according to the Quarterly Data Report.
The Spanish government said that the Fondo de Adquisicion de Activos Financieros (FAAF), which has a total value of Ä30 billion ($38.9 billion), can be enlarged to Ä50 billion. The program is intended to support credits to households and other Spanish entities by providing funding in a way similar to current European Central Bank (ECB) repo activity. It is the only government program directly aimed at asset purchase in Europe. Market analysts said it might reduce the Spanish securitization asset overhang. The fund's main targeted asset class involves covered bonds/cedulas issued later than October 2008, as well as SME CLOs and RMBS issued after August 2007. Minimum rating requirements are triple-A and double-A for ABS bonds.
The European Securitization Forum (ESF) said last week that it welcomed the issuance of Mortgage Finance: Final Report and Recommendations by Sir James Crosby. The report highlights the shortage of mortgage financing and its likely impact on consumers and the wider economy. It also concludes that banks' inability to raise ABS funding, even for structures where default risk is considered remote, is the type of market failure that might warrant government intervention. Crosby recommends the establishment of an auction program for U.K. guarantees on triple-A rated RMBS of up to £100 billion ($153.2 bilion) over two years. Rick Watson, managing director of the ESF, said that such a program would increase the availability of cash specifically targeted toward new mortgage lending, and would likely open up significant new investor demand at a time when it is urgently needed. The report also discusses alternatives to government intervention, noting industry initiatives to enhance standardization and improve the transparency of asset-backed securities structures. Specifically, the report urges authorities to encourage the adoption of industry-led initiatives on this front, such as those proposed by the ESF and SIFMA, and references the American Securitization Forum's Project RESTART.
Fitch Ratings is in the process of updating its criteria for rating multi-issuer cedulas hipotecarias (CH), or Spanish covered bonds transactions. The review will incorporate an updated assessment of the liquidity risk that multi-issuer CH investors are exposed to in case of CH issuer default. The agency said it has taken into account the potential for widespread bank defaults, which presently has become more limited given direct government support and because targeted liquidity funds have been established. The agency plans to publish its updated criteria in 1Q09. An area of focus will be the amount of liquidity support needed for stand-alone transactions, as well as for series within multi-issuance programs, to support outstanding multi-issuer CH note ratings. The updated criteria will also address the obligor concentration risk present in these portfolios, and acknowledge the support that financial institutions may receive in times of stress. This more detailed review may result in rating actions for selected older multi-issuer CH transactions where liquidity facilities may not be sufficient under revised assumptions, Fitch said. Transactions since the end of 2007 are unlikely to be affected, as they have generally been issued with shorter tenors and larger liquidity support. Since the inception of the multi-issuer CH market in 2001, there has never been a delinquency or default of any underlying refinanced CH.
Fannie Mae named David Johnson its executive vice president and chief financial officer. Johnson was formerly with Hartford Financial Services Group, where he served as an executive vice president and chief financial officer. He was also previously CFO at Cendant Corp. and spent 12 years in investment banking at Merrill Lynch. Fannie Mae has operated under conservatorship since September. The GSE reported a $29 billion 3Q08 loss.
Last Tuesday, the U.S. Department of the Treasury and the Federal Reserve announced two initiatives to stabilize the asset-backed and mortgage-backed sectors. The first is the Term ABS Loan Facility (TALF) (see story on p. 16). The Fed also announced that it will be buying up to $500 billion in agency MBS - FNMA, FHLMC Golds and GNMA - as well as up to $100 billion of agency debt. This program is much simpler than the TALF, according to RBS Greenwich Capital (RBSGC), because the Fed possesses the statutory authority to own agencies as well as agency MBS. This is why, according to RBSGC, "instead of the convoluted SPV sleight-of-hand, the Fed is simply going to purchase $100 billion worth of agencies and agency MBS up to $500 billion." This agency purchase program, which includes collateral from Fannie Mae, Freddie Mac, and the Federal Home Loan Banks, will be bought via primary dealers starting this week. The MBS purchase program will be carried out by asset managers.
The Federal Housing Finance Agency (FHFA) last week released the first monthly Foreclosure Prevention Report. The publication offers comprehensive monthly data on Fannie Mae and Freddie Mac's loan modification efforts. It also includes details on Fannie Mae's HomeSaver Advance (HSA) program. The report showed that as of Aug. 31, from their 30.7 million residential mortgages, the GSEs completed 18,693 loss mitigation actions, which included 4,402 loan modifications. The loss mitigation performance ratio for the month was 53.5%, and 54% year-to-date. In August, the last pre-conservatorship month, delinquencies of 60 days or more continued to grow, reaching 2.03% of total loans, increasing from 1.43 % in January 2008. Fannie Mae's HomeSaver Advance program, introduced in 1Q08, allows qualified borrowers an unsecured loan up to the amount of the delinquent payments to bring the mortgage account current. In August, 7,914 mortgages were brought current with this program, according to a FHFA release.
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