Citigroup appointed Bill Beckmann to create a new division for Citi's U.S. residential mortgage business. The new unit will include origination, servicing and capital markets securitization execution. Beckmann will still report to Carl Levinson, who now heads up the U.S. consumer lending group, and to Jamie Forese, who is co-CEO of markets and banking. In an internal memo, Citi said that setting up the U.S. mortgage businesses in this way will improve its overall effectiveness and allow the company to better serve the firm's existing clients while providing greater value to the firm's shareholders. In his new role, Beckmann is expected to work closely with Jeff Perlowitz, head of global securitized markets, in order to align Citi Residential Lending's origination and servicing functions with those of CitiMortgage. Mortgage origination activities of the firm's CitiFinancial, Citibank and Smith Barney branches will stay with those business entities, according to the same internal memo. Beckmann and Perlowitz will head up capital market analytics, risk management and execution across non-agency products. All other global securitized market businesses will continue to report solely to Perlowitz. Beckmann will also work closely with corporate treasury in terms of its overall portfolio, capital objectives and required return hurdles.
Mourant has expanded its international finance administration services into Ireland by opening a new office in Dublin. The new office will be headed up by Peter O'Leary, who previously worked with Mourant's Jersey-based team. O'Leary said that the structured finance market in Dublin continues to show significant growth and demands high-quality services to support the growing number of investment banks and lawyers involved in structuring this type of vehicle. "The combination of Dublin's position continually moving toward the forefront of capital market structures, coupled with increasing requests from our existing clients, has illustrated to us that the environment is favorable to set up a dedicated office in Ireland to deliver our highly regarded and high-quality SPV administration services," O'Leary said.
Stroock & Stroock & Lavan named two new special counsel and six new partners, including two in structured finance. Naji Massouh was named special counsel focusing in structured finance and insurance-linked securities. Massouh has experience securitizing first lien, single family, home equity, home improvement, auto and commercial loans and has been involved in structuring and documenting CDOs, credit derivatives, repurchase agreements, ABCP programs, letters of credit and royalty income stream obligations. The firm also named Craig Mills as a partner concentrating in structured finance, where he has worked on deals involving a variety of asset types, primarily focusing on CDOs. The new partner has experience with synthetic CDO transactions, including representing counterparties, and has been active in emerging insurance-linked securities.
Sallie Mae has appointed Anthony Terracciano chairman of its board. Former Sallie Mae chairman Albert Lord, who held the chairman position for three weeks, has been appointed vice chairman and will remain chief executive officer of the student loan firm. Terracciano served as the former president of First Union Corp., which is now Wachovia, chairman and CEO of First Fidelity Bank Corp. and president and chief operating officer of Mellon Bank, among other positions. John Remondi, who most recently served as portfolio manager at investment manager Par Capital Management, has rejoined Sallie Mae as vice chairman and chief financial officer. Remondi originally joined Sallie in 1999. In another highlight for the company, Sallie Mae has come out with its first Federal Family Education Loan Program (FFELP) student loan deal for 2008, SLM Student Loan Trust 2008-1.
U.S. commercial real estate loan CDO delinquencies are up again from last month, according to the latest U.S. CREL CDO loan delinquency index from Derivative Fitch. Three new delinquent loans contributed to a 0.47% U.S. CREL CDO loan delinquency rate for December 2007, compared to last month's delinquency rate of 0.15%, excluding repurchased loans, Fitch said. Seven loans were delinquent as of the December 2007 index, two of which, that are collateral in two different CDOs, are secured by the same property, the rating agency said. Three loans, representing 0.15% of the CREL CDO collateral, were 30 days or less delinquent in December 2007. One loan, which accounts for 50% of the total 30-day-or-less delinquencies, is a chronic late payer that is not currently anticipated to result in a loss to the CDO, Fitch said. The rating agency said it will increase the probability of default to 100% for delinquent loans that are unlikely to return to current. This adjustment could increase the loan's expected loss in cases where the probability of default was not already 100%.
E*TRADE Financial announced that it has completed the sale of $3 billion in MBS and municipal bonds. The firm took a loss of just under $5 million in order to raise capital for the company. Aside from asset sales and reduction in home equity loans, E*TRADE reduced its wholesale borrowing levels by eliminating an aggregate of roughly $3.5 billion in Federal Home Loan Bank advances and repurchase agreements quarter over quarter. The company also said it will exit the institutional trading business by closing its remaining institutional trading desk, which has fewer than 30 employees. E*TRADE has formed a special committee to reduce the risk of its real estate portfolio. The committee will be led by Robert Burton, who recently joined from Wachovia and has been appointed E*TRADE Bank's COO.
MBIA unveiled a plan to strengthen its capital base last week. Among the company's capital saving changes includes a reduction in its quarterly shareholder dividend to 13 cents per share from its most recent dividend rate of 34 cents per share, saving the monoline roughly $80 million per year, MBIA said. The bond insurer will also issue $1 billion in surplus notes to be treated as equity. Both Fitch Ratings and Moody's Investors Service said that if the offering is successful, it will effectively address MBIA's capital shortfalls. Among other capital conservation initiatives, the company said it will purchase reinsurance in the near term which is expected to limit the company's capital requirements by $50 million to $150 million.
The Securities Industry
and Financial Markets Association (SIFMA) is forecasting a median 15% dip in fixed income issuance this year to $3.4 trillion from the estimated $4 trillion issued in 2007. These estimates are contained in the association's 2008 U.S. Market Outlook. The forecast is based on SIFMA's survey of member firms. The association also projects a slower but positive GDP growth in 1H08 as well as a pick-up in the second half of 2008, with the economy expected to work through the current housing and credit market turbulence. SIFMA also estimates outstanding commercial paper volume will dip to $1.76 trillion in 2008 from $1.86 trillion in November 2007. While ABCP is projected to drop an added 16%, outstanding nonfinancial commercial paper should increase more than 15%. ABS issuance should drop 36% this year to $325 billion from $507 billion in 2007. Home equity loans, formerly the biggest component in the ABS sector, are projected to dip 72% to $63 billion from $222 billion as a result of depressed pricing as credit spreads remain at historically wide levels. Credit card receivables are projected to replace home equity loans as the largest ABS sector at $90 billion in 2008, a dip from the record level of $95 billion in 2007. Total mortgage-related securities issuance is expected to decline close to 13% in 2008 to $1.7 trillion, although that figure reflects a 14.8% drop from 2007 issuance levels.
SIFMA also held a conference call last Tuesday announcing that it will not be creating a 10/20 IO TBA market for now. Instead, SIFMA will be watching for signs of the sector's stability and growth before taking up the agenda again. According to a report by JPMorgan Securities, concerns focused on diminishing recent issuance as well as the relatively modest net CMO issuance or float. The float currently stands at roughly $60 billion out of $100 billion outstanding. Monthly issuance has plunged to roughly $5 billion from a peak of $9 billion, JPMorgan said. The market share of the 10/20 product has also decreased to 5% from 11%. Aside from this, some market players are concerned that hybrid ARMs might reclaim market share away from 10/20s in a steep curve scenario, which the market might be heading into. Though JPMorgan analysts do not necessarily agree with all of these fears, they said that the lack of enthusiasm from the dealer community is hindering the attempt to create a TBA market for this collateral for now.
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