ABS

Emerging market players in the structured finance world might soon have a new platform to develop mortgage covered bonds: Peru. Legislation on this product is currently before the Peruvian congress and is piquing the interest of foreign and domestic ABS devotees alike.

ABCP outstandings throughout North America continue to decline as both the supply of and demand for paper has weakened. While conduits with non-traditional structures or those financing out-of-favor asset portfolios have exited the space, the remaining market players continue to cleanse unfavorable asset types from their portfolios and terminated non-core banking relationships.

A number of recent studies have documented the correlation between negative home equity and the incidence of defaults. A report by CoreLogic released in February stated that when negative equity exceeds either 25% of a loan's balance or $70,000, "homeowners begin to default with the same propensity as investors."

Now more than ever the case for developing a U.S. covered bond sector has become easier to make as investors want the security of a high-quality product.

Providing public deal-like disclosures on private placements? Issuers retaining a 5% stake in offerings issued from securities shelves? Requiring issuers to provide loan-level data regularly, even in the private market, and for asset classes where such detailed data has never been available?

At the start of the year, supply/demand technicals were deemed generally supportive to the market, despite the Federal Reserve's impending exit. Net issuance was estimated at around $320 billion for the year with the Fed's final-quarter purchases totaling $139 billion.

New Mexico District Judge Stephen Pfeffer has dismissed a pay-to-play suit filed by former Educational Retirement Board (ERB) Investment Officer Frank Foy and the state watchdog on grounds that the claims and alleged wrong doing pre-date the pertinent state law.

The 12 Federal Home Loan Banks reported combined earnings of $345 million in the first quarter, a 6% decline from the same period last year.

Capstead Mortgage Corp., a REIT that invests in GSE-backed MBS, is warning that higher prepayments will hit the market in the second and third quarters because of efforts by Fannie Mae to "buy out" delinquent loans from MBS pools.

The Carlyle Group has acquired $4.2 billion worth of CLOs and $950 million worth of managed accounts from Stanfield Capital Partners, increasing the size of its credit assets under management to $18.1 billion from $13 billion.

Manager Activity: Autos Book Runner Amount (US$ Mil) Rank Mkt.

Wells Fargo Securities has expanded its RMBS platform. The RMBS group now offers a full suite of advisory, structuring, research, distribution and trading services to the firm's residential origination and investing clients and to Wells Fargo Home Mortgage (WFHM).

Treasury secretary Timothy Geithner said today that mortgage servicers are not doing enough to help distressed homeowners, according to a Reuters report.

Redwood Trust officials said its groundbreaking prime jumbo residential mortgage securitization did better than expected in the market, suggesting that there is a considerable amount of pent-up demand for this type of product.

Cohen & Co. hired Rob Cestari to the mortgage securities trading unit.

The mortgage assumptions used to derive risk-based capital (RBC) charges under the new 'RMBS Initiative' approach are similar to those used in Fitch Ratings' U.S. RMBS Recovery Rating (RR) analysis, according to a study by Fitch's Insurance and RMBS groups of the National Association of Insurance Commissioners' (NAIC) RMBS Initiative' results.

GMAC subsidiary Ally Bank priced its dealer floorplan securitization. The $546.9 million Ally Master Owner Trust 2010-2 transaction is lead managed by Credit Suisse.

A Republican alternative to Sen. Chris Dodd's massive financial services bill gives the mortgage banking industry hope that Congress understands the dire need for an exemption on MBS risk retention.

The full Senate is closer to taking up the financial services regulatory reform bill now that Sen. Richard Shelby, R-Ala., has declared an impasse in his negotiations with Sen. Christopher Dodd, D- Conn.

Escalating troubles at Ambac Assurance Corp. and the resulting inability of the bond insurer to make even less of a partial payment on claims than it previously expected caused U.S. Central Federal Credit Union to restate its fourth quarter results for 2009, adding $274 million in losses that came from MBS investments.