RMBS

For the last several years, Brazil's main real estate ABS security, the CRI, has often looked like the poor cousin to the FIDC, a popular vehicle that has proved a good fit for a wide range of assets, even real estate.

The recently-released Senate financial reform package contains a number of provisions designed to prevent a recurrence of the performance problems that triggered the recent financial crisis. The most widely discussed initiative requires "securitizers" to retain a minimum of 5% of the credit risk of any sale or conveyance of assets through the securitization process.

The 8.8-magnitude earthquake that shook a long swath of Chile on Feb. 27 left damage that could work its way into ABS deals, sources said. The most vulnerable asset class is related to real estate, including deals backed by residential mortgages and lease-to-own contracts, but there are safeguards that should help transactions avoid serious deterioration.

The analysis of the changes in the GSEs' delinquent loan buyout policies focused on their impact on prepayment speeds and coupon swaps. An underlying notion was that the implementation of FAS 166 and 167 by Fannie Mae and Freddie Mac, which took place effective at the beginning of 2010, paved the way for the announcement; since the loans are now carried on their books at fair value, buyouts no longer have any affect on the GSEs' income statements.

With new accounting rules, regulatory uncertainty, and wary investors making ABS uneconomical for issuers, pockets of the securitization market are paralyzed. Participants are forced to look at alternative funding sources, which Nora Colomer explores in this month's cover story.