ABS

Lehman Brothers is making a lot of noise about its new U.K. RMBS loan modification program through which the firm aims to protect its nonconforming RMBS transactions. The loan modification process consists of a number of potential alternative strategies such as payment deferrals and the extension of maturity dates, among others.

Much ado was made about the string of soccer securitizations backed by popular teams with a global presence. But the reality is that outside the big names, securitization has proved too costly for many teams in the European soccer leagues.

As the American economy appears to be on the precipice of a recession, the industry is now engaged in a dual debate about how to stave off a market downturn and how to recover from one.

There wasn't any good news that emerged from the European CDO sector in 2007. But for banks and investors who braved the market and looked for some value in this beleaguered sector, European synthetic CDO tranches offered some respite.

The overall European ABCP market in 2007 was characterized by uncertainty. There were more questions than answers, and there was very little deal activity.

The European banking sector has been accused of being inadequately prepared to support securitization structures under crisis scenarios, despite a heavy reliance by these banks on the capital markets engine for funding. However, through new initiatives, European regulators are now making sure these financial institutions are more aware of the risks involved.

The Middle East seems to be immune to the rest of the problems ailing the securitization world. The oil-rich nations are now sponsoring Shariah-compliant CMBS and RMBS using proceeds from petroleum wealth to serve as a liquidity backup.

From the beginning, many ABS professionals greeted the master liquidity enhancement conduit (M-LEC) plan with hearty skepticism.

A number of emerging market players delighted in the rhetoric last year about their world trading places with the U.S. The longtime risky bet and the safe haven, it appeared, had flipped.

Securitization investors aren't the only ones getting jittery in the current credit environment. The negative headlines that dominated 2007 seem to be making consumers nervous, and this edginess has translated into scarce deal flow for credit card ABS.

Not too many securitization players are going to remember 2007 fondly. That applies to emerging market devotees too.

Issuers from mature asset classes as well as the small business sector gave the securitization market a fledgling start to the new business year. At least $4 billion in deals were expected to price by around Jan. 11.

After last month's announcement that uber-wealthy investor Warren Buffett's Berkshire Hathaway would be starting up a new municipal bond insurer, many industry participants felt that the competition would likely deepen the already strained capital positions of other wrap providers.

Recognizing that 2007 was an unusual year, and that highlighting individual transactions would not convey the ethos of a tumultuous year, the ASR staff has decided to veer away from our usual practice of naming notable deals. Aside from the comparatively scarce deal flow in 2H07, 2007 was notable not because of innovative transactions, but it will go down in history as a year of reckoning for all industry participants.

August turned out to be a blisteringly dry month for the ABCP and structured investment vehicle (SIV) markets.

Not that anyone needed further proof of just how significant the collapse of the subprime market was last year. But, last month, the American Dialect Society selected "subprime" as the 2007 Word of the Year.

The reputations of the rating agencies mirrored the fate of the securitization market last year: As the credit conditions went south, so did their standing in the industry.

After a tumultuous summer in mortgages triggered a whirlwind of CDO downgrades, this past year will not be seen in a positive light for U.S. ABS CDOs.

Monolines appear to be the primary target in the securitization market's game of mortgage loss speculation. Sources said that revisions to rating agency criteria for guarantors and the negative outlooks that resulted were the ugliest points in 2007 for these bond insurers.

Whenever U.S. rating agencies assess foreign asset-backed commercial paper programs, it is fair to assume that the sponsor is about to issue ABCP in the U.S.