ABS

Lehman Brothers, Merrill Lynch and American International Group (AIG) have at least one thing in common: They owned depositories but were not overseen by the Federal Reserve Board.

Cataclysmic changes occurred in the financial landscape last week. Lehman Brothers failed to find a buyer and declared Chapter 11, Merrill Lynch was bought for $50 billion by Bank of America in a total stock transaction and American International Group (AIG) was taken over by the Fed in an $85 billion bailout.

The case of Lehman Brothers proves that the bar for banks has just been raised. Until last week, financial institutions of such size were seen as being in the too-big-to-fail category.

The mood in the ABS market was understandably gloomy last week, as traders expressed disbelief and apprehension about the sector, not to mention the financial industry as a whole.

Assured Guaranty announced that it has given a waiver to WL Ross & Co. to purchase up to $5 million additional common shares in open market transactions.

In another casualty of the Lehman Brothers failure, Fitch Ratings downgraded and placed on rating watch negative the servicer ratings of Capstone Mortgage Services, a subsidiary of Lehman Brothers Holdings and the U.K. servicer to the Eurosail, Preferred Residential, Southern Pacific, MARS 4, EMF-UK 2008-1 and Mortgage Funding 2008-1 transactions.

Freddie Mac reported 30-year fixed mortgage rates averaged 5.78% this week, down 15 basis points from the last survey.

Lloyds TSB confirmed today that it has offered to buy HBOS in the wake of the downgrade actions seen yesterday. Both Standard & Poor’s and Fitch Ratings took ratings action on various HBOS entities.

Housing starts declined a larger-than-expected 6.2% to a seasonally adjusted 895,000. This is the lowest level the data has been in 17 years. The consensus call was for a 1.6% decline.

It's official.

Markit announced today that following a majority dealer vote its iTraxx Asia, Japan and Australia indices will now roll into Series 10 on Sept. 29 instead of Sept. 22 as previously planned.

Refinancing activity surged — as was expected — in response to the dramatic decline in mortgage rates following the government takeover of the GSEs.

Barclays Capital will be buying Lehman Brothers' capital markets and investment banking divisions, according to sources close to the firm.

The mortgage-related businesses that Bank of America Corp. would get from buying Merrill Lynch might look redundant after its July purchase of Countrywide Financial Corp., but some observers say one or both of Merrill's subprime servicing units might help BoA work through its problem Countrywide loans.

Citing "recent industry and market conditions, Ginnie Mae said it will raise the bar for issuers of its mortgage-backed securities.

George Miller, executive director of the American Securitization Forum, today made the following statement responding to the proposed amendments from the Financial Accounting Standards Board:

Federal Housing Finance Agency Director James Lockhart just announced the appointments of new non-executive chairmen of the Boards of Directors of Fannie Mae and Freddie Mac.

Following its rating downgrade of Lehman Brothers Holdings long- and short-term

The offshore law firm Appleby said it plans to extend its global network with offices opening in Dubai and in Zurich.

The Financial Accounting Standards Board just released three exposure drafts.