ABS

A recent article in the Washington Post noted that the Obama administration is engaged in active discussions to create a regulatory commission "that would have broad authority to protect consumers who use financial products," including mortgages.

At the start of 2009, the formula that would save securitization began with government intervention. Six months down the line, the U.S. and European markets have seen some results. For Europe, the story has naturally been fragmented or on a country-by-country basis where some governments pledging more support than others.

While much of the focus has been placed on U.S. and U.K. government initiatives, Continental Europe has also made strides to implement measures to alleviate the economic pressures on the market.

In the current pantomime of financial regulatory turmoil, the villain of the piece is easily cast - securitization. Even the relative obscurity of the word has added to its perceived villainy. A difficult word to pronounce for the uninitiated, it has been booed and hissed at by politicians of all sides. The Turner Review, published on March 18, firmly places securitization - at least in its more complex forms - at the heart of the current banking crisis. But does it deserve its reputation?

As the turmoil in global financial markets continues to affect financial institutions around the world, it is increasingly evident that the asset repurchase facilities provided by central banks have become a lifeline for banks struggling to raise capital in the current climate. In a market devoid of its traditional investor base, originators and arrangers of securitization transactions within the Eurozone have come to rely heavily on the European Central Bank's (ECB) asset repurchase or "repo" facility which allows (among other assets) ABS to be used as collateral for funding.

The deadlock regarding securitization activity in Europe still persists. While pressure on credit markets eased significantly since March, ABS spreads did not follow suit! Given the rapid pace of spread tightening and sentiment changes in the credit universe during the last couple of months, the jackpot question this spring from a credit risk perspective regards timing: Will the credit crisis fade sooner than anticipated or do markets face another bull trap? And will the ABS market keep its outcast status or will there be a rehabilitation?

In recent months, portfolio managers of cash flow CLO vehicles have been faced with the unenviable task of keeping their CLOs afloat in an environment in which bank loan prices in the global loan markets have declined to unprecedented levels. This task has become increasingly difficult, due in large part to certain provisions in the underlying CLO documentation that, in today's illiquid market, no longer operate as intended. At a time when it is more important than ever for managers to actively manage the credit risk in their CLO portfolios, CLO managers have suddenly found their hands tied by provisions that, while initially conceived to safeguard the credit quality of CLO portfolios, now serve as a disincentive for managers to replace credit impaired loans with stronger ones. This article will examine the dilemma confronting CLO managers who wish to improve their portfolios by trading rapidly deteriorating loans for better-performing so-called "deep discount" loans.

On April 9, around the time the future-flow world was closely tracking troubled Kazakh banks, the International Finance Corp. (IFC) held an internal seminar on the product.

European commercial real estate and European CMBS continue to feel the effects of the events of last year when credit contraction, asset-value declines, and dislocation throughout the global financial systems began to show their effects in European CMBS through rising rates of loan defaults. This article looks at the performance of the market since 2008 and considers some factors that are likely to be relevant in 2009 and that we review, among others, as part of our credit analysis of securitized pools or our assessment of the counterparty risk in the transactions we rate (all statistics in the article refer to 2008 unless otherwise indicated).

Over the last year, laissez-faire has become seriously dated.

At the end of April, the Obama administration announced modification incentives for second lien loans under the Hope for Homeowners program.

The Bank of Cyprus Group completed the securitization of a mortgage loan portfolio in Greece.

The Spanish savings bank Cajasur has asked the European Central Bank (ECB) for an extra €200 million ($ 275.7 million) following Fitch Rating's downgrade last month of the banks long-term ratings, according to market reports.

The International Association of Credit Portfolio Managers (IACPM) has elected Mark Hughes, RBC Capital Markets’ global head of credit, as its chairperson.

Distressed credit portfolio manager Michael Holmberg has joined Neuberger Berman Group, leaving behind the firm he founded.

Leveraged loan investors are in an uproar over the fees they pay to obtain a credit estimate — a private rating on an individual loan — from Moody’s Investors Service.

President Barack Obama has signed two housing bills that will provide relief for troubled homeowners that need to refinance, and will crack down on mortgage fraud.

The Treasury Department is prepared to lend roughly $7 billion to GMAC Financial Services, the parent company of the nation's sixth largest residential servicer, according to published reports.

The legislation President Obama is about to sign, overhauling the credit card industry, may indeed cut off access to credit as many issuers warn.

The Senate has approved a housing bill that revamps the FHA Hope for Homeowners program and strengthens federal deposit insurance, clearing the measure for the President Obama's signature.