Securitization

Two U.K. RMBS have been announced from Paragon Group of Companies and Barclays Bank.

The list of banks suing MBIA just got smaller. Wells Fargo Bank, formerly Wachovia Bank, pulled out of three lawsuits against the insurer that challenged the New York State Insurance Department’s approval of the restructuring of MBIA Insurance Corp. into two entities.

The new-issue private label CMBS market has been taking a breather, and how long it will last depends on what happens as far as international financial concerns and other events that have roiled U.S. and world markets.

Mortgage application activity was essentially flat at +0.2% in the week ending Oct. 28, said the Mortgage Bankers Association (MBA).

Europe might be feeling great uncertainty over how to resolve its sovereign debt crisis, but its securitization market has still managed to restart.

Because of still challenging market-making conditions, Credit Suisse Group is set to either downsize or cut altogether some securitization businesses and fixed-income units.

If the Federal Reserve launches a new round of MBS buying it could cause spreads between mortgages and Treasurys to widen — as would be expected — but it also would spur returns for broker/dealers.

IPFS Corp., through its wholly-owned subsidiary PFS Financing Corp., is issuing Premium Finance Asset Backed Notes, Series 2011-B.

Fannie Mae acquired $55.3 billion of mortgages from its seller/servicers in September, its best purchase month since March, and a sign that loan production is gaining traction in the primary market.

Investec has launched a £204 million ($325 million) securitization dubbed Gemgarto 2011-1.

The New York Supreme Court late Monday denied Countrywide and Bank of America’s motion to consolidate various claims against them made by four bond insurers led by MBIA Insurance Corp.

Jefferies appointed Guy Cornelius as a managing director and head of sterling credit sales. The firm also hired Christian Janssen as a managing director and head of commercial real estate debt capital markets Europe.

Citigroup has completed pricing on the latest CLO to hit the market, raising a $408.7 million fund to be managed by WCAS Fraser Sullivan Investment Management, according to a source familiar with the transaction.

Galton Capital Management, the residential mortgage credit investment unit for Mariner Investment Group, appointed Tim Lynch as head of servicing oversight.

Nearly two-thirds – or 60% – of European CMBS maturing loans could fail to repay by the end of 2012, according to Standard & Poor's.

Just as the industry began to feel comfortable about the re-emergence of CMBS financing and CMBS 2.0 began to take off, the CMBS market started getting ahead of itself this summer and then certain issues cropped up.

Securitization pros have had to constantly come up with new deal structures to respond to challenges posed by the ongoing financial crisis.

Key elements of recent policy initiatives, such as the revised HARP program and the Fed's "Twist," have focused on either pushing down fixed mortgage rates or taking advantage of their current low levels. In addition to the Fed's actions, many observers have placed a devotional faith in the Fed's ability, as Lawrence Summers wrote in a recent op-ed piece in the Washington Post, to "...support demand and the housing market by again expanding purchases of mortgage-backed securities." However, an underappreciated threat to the mortgage and housing markets is the reliance of many American borrowers on low Libor rates. This means that the Fed and other policymakers must be aware of the vulnerability of the U.S. housing markets to rate spikes resulting from upheavals in the European financial system.

With so much CLO investment capacity going offline over the next few years, the loan market is getting creative in structuring deals to accommodate this waning investor class.

Many investors in CDOs and similar products were taken by surprise when a U.S. bankruptcy court declined to dismiss an involuntary chapter 11 case filed against CDO-squared issuer Zais Investment Grade Ltd. VII (a.k.a. ZING VII). A test of the so-called bankruptcy-remoteness of offshore issuers was perhaps inevitable given the volume of distressed CDO securities in the market today. From a pure bankruptcy law perspective, the court's decision is not revolutionary; it simply confirms the reality that entities can still wind up in bankruptcy even if they were structured to avoid it. But for investors in the lower tranches of distressed CDOs hoping to see values rebound over time, the ZING VII bankruptcy makes the prospect of future "tranche warfare" in chapter 11 seem inevitable. It remains to be seen whether the dismissal will be affirmed on appeal, whether ZING VII's senior noteholders will succeed in confirming their chapter 11 plan, and most importantly, whether ZING VII is merely the first of many CDO bankruptcy cases to come. Regardless of ZING VII's ultimate outcome, the bankruptcy court's analysis in denying the motion to dismiss should be considered carefully as market participants structure, sell or buy into future CDOs.