ABS

The drop in home price appreciation (HPA) was the crash that preceded the current economic pileup, figuratively speaking. With the expected recession intensifying the unemployment rate in the U.S., the HPA decline might be further exacerbated despite the Federal Reserve's attempts to curb payment shock.

The government's efforts to stem the tide of home foreclosures in the U.S. expanded with the recent passage of the economic stimulus package.

Standard & Poor's announced rating actions on several monoline bond insurers including a downgrade of XL Capital Assurance and XL Financial Assurance to 'A-' from 'AAA.' The two companies remain on CreditWatch with negative implications. FGIC was also downgraded to 'A' from 'AA' and remains on CreditWatch with developing implications. Both Ambac Assurance Corp. and CIFG Guaranty had their 'AAA' financial strength rating affirmed and remain on negative outlook. MBIA Insurance Corp had its 'AAA' financial strength rating affirmed and was assigned a negative outlook. These ratings adjustments follow additional stress tests by the rating agency in the monolines' non prime book of business.

The Association of Financial Guaranty Insurers has released a statement regarding insurer MBIA's withdrawal from the association. "AFGI members are surprised at the withdrawal of MBIA from AFGI," Sean McCarthy, chair of the association of AFGI and president and COO of Financial Security Assurance Holdings Ltd., said. "AFGI is a trade association that serves as a consistent informational source, represents the industry in standardizing financial reporting and disclosure and speaks for the industry on a number of issues." McCarthy added that the AFGI has not taken a position on member firms' organizational structures, lines of business or execution formats, like CDS or policy forms. Aside from this, all of the financial guaranty products offered by industry members, including insured CDS, are allowed under applicable insurance law and regulation. "AFGI remains committed to supporting the industry and its members who offer credit enhanced products in the municipal and asset-backed markets," McCarthy said.

Markit announced plans to launch the first global, multi-bank, cross-asset client valuations platform called Markit Valuations Manager. The platform will fuse electronic delivery of dealer OTC derivative and consensus cash valuations with Markit's independent valuations into a single platform. The motivation behind the new product comes from recent regulatory and accounting changes that have increased the importance of independent valuation sources for funds, Markit said. David Lefferts, managing director at Markit, will lead the initiative and six global investment banks have agreed to support the launch of the platform including Citigroup, Credit Suisse, Goldman Sachs, JPMorgan, Merrill Lynch and UBS. These banks will provide Markit with end-of-day and end-of-month client valuations for OTC derivative instruments and cash securities. Markit will then create a composite of dealer marks for cash securities and counterparty present values for OTC derivative positions, which clients can compare with Markit's independent valuations. The platform will launch in 2H08 with coverage of bonds and derivatives. Markit expects to expand the platform to include more banks and additional cash and derivative asset classes including ABS and MBS.

Moody's Investors Service has started to rate municipal bonds insured by Berkshire Hathaway Assurance Corp. (BHAC) 'Aaa.' These bonds are supported by a "wrap of a wrap," Moody's said, meaning that the bonds are first supported by a financial guaranty insurance policy from BHAC and then further supported by a contingent-payment insurance policy provided by 'Aaa'-rated National Indemnity Co., both of which are owned by Berkshire Hathaway.

Deutsche Securities appointed David Shrenzel as head of global banking in Japan effective from Feb. 1, 2008. Shrenzel assumes the post from David Hatt, President & CEO of Deutsche Securities, who has held the post on an interim basis. Shrenzel remains a co-head of the global capital markets division at DSI with Yuji Nomoto, a position Shrenzel has held since April 2007, but is succeeded by Aaron MacDougall as head of global credit trading at Deutsche Securities, a post Shrenzel has held since September 2002. Shrenzel originally joined Deutsche Bank Group in March 2000 as head of the global ABS credit products group in New York. Before that, he spent seven years with the asset securitization business at Credit Suisse. MacDougall joined Deutsche Bank Group in June 2000 as a senior trader in the global credit trading business and, prior to this appointment, was the head trader across Deutsche Securities' flow, structured and exotic corporate credit trading and convertible bond trading businesses. Before he joined Deutsche, MacDougall worked in fixed income derivatives, credit trading and structuring at Bankers Trust and at Morgan Stanley.

After ending 2007 in disastrous fashion and becoming a downright pariah in 2008, the MBS market is in desperate need of inspiration.

Asset securitization professionals stuck ardently to their new routines last week, supporting credit card and auto loan securitizations to the exclusion of just about every other asset class.

Despite what seems like an almost nonexistent CDO market, bank balance sheet CLOs are still garnering investor interest, according to sources.

Rumors circulating around the market suggest the possibility of bailout plans by a bank consortium as well as potential reinsurance contracts to aid struggling guarantors. Last week Warren Buffett even went as far as to make a public offer to reinsure $800 billion in municipal bonds that are currently insured by Ambac, MBIA and FGIC.

Falling prices are forcing total-rate-of-return market-value CLOs to liquidate their underlying assets. These unwinding CLOs could present opportunities for investors, but could also drive prices down even further. And sources say the loan market has already hit historical lows.

While Mexico's structured finance has ground to a halt amid the generalized anxiety in the debt markets, Standard & Poor's offered a few forecasts for the market

Standard Chartered was set to finalize the $7.2 billion liquidity injection to its troubled SIV called Whistlejacket. However, deeper losses in the underlying collateral have reversed the SIV's good fate.

Credit card ABS issuers poured significantly greater amounts of new paper into the securitization market so far this year. From January through Feb. 11, about $19 billion in card ABS deals were completed, according to the ASR Scorecard database. Other industry tallies put issuance at about $13 billion, but either figure easily outpaces the $10 billion that was done in the same period the year before.

The plan constructed by six major mortgage lenders to aid homeowners and stem the flow of foreclosures has been met with skepticism by market participants. They are questioning the extent to which the proposal will actually help troubled borrowers.

The first securitization deal from the Central and Eastern European (CEE) region - a 280 million ($408 million) auto leasing deal for Raiffeisen Leasing Polska, the Polish leasing subsidiary of Raiffeisen International - closed earlier this month.

The emerging markets of Europe, Middle East, Africa and the Commonwealth of Independent States witnessed a 23% drop in structured finance issuance last year to $7.69 billion, according to a report by Moody's Investors Service.

ERMBX.UK, the index designed to reference synthetic U.K. prime MBS, looked set for an early launch a few weeks ago, with market reports indicating that the new index could go live earlier than the ECMBX.

The reconstruction of the securitization market took another turn last week as a collective group of European securitization market associations outlined a three-pronged initiative aimed at improving market transparency.