Securitization

As part of a joint initiative, the FHFA and HUD recently released a presentation outlining potential revisions to the current system of servicer compensation. The initiative's stated goals are 1) improving customer service for borrowers, 2) reducing financial risks for servicers, and 3) helping servicers better manage their pipeline of nonperforming loans (NPLs). In light of the asset's unusual economics, an examination of servicing compensation is long overdue. However, the initiative's proposed changes to the compensation structure for NPL servicing runs counter to the notion of reducing the mortgage market's dependence on the government.

ABS investors' search for yield has taken them to an interesting place, where products that were once marginal are now the main attraction. In vogue are decidedly esoteric deals, ranging from whole business securitizations to structured settlement transactions.

The government's proposals for mortgage risk retention, aimed at getting sponsors of securitizations to retain some skin in the game, could potentially change the commercial real estate (CRE) financing landscape, while creating opportunity for some.

Prepayment responsiveness has been significantly reduced because of the housing/financial crisis that has resulted in very tight credit conditions and significant home value declines. Analysts expect this phenomenon to remain for some years, especially as home values continue to weaken and underwriting standards tighten.

European securitization market players will apparently put more "skin-in-the-game" than their U.S. counterparts if U.S. regulatory requirements for risk retention move ahead as written.

As with their counterparts in other areas of structured finance, emerging market players have been mulling over the question of where exactly their deals fit in the new regulatory landscapes of Western Europe and the U.S.

The financial crisis reached its apex in fall 2008 when major Wall Street firms collapsed. But for the big three rating agencies - Moody's Investors Service, Standard & Poor's and Fitch Ratings - the crisis began at least a year before, when they started issuing massive downgrades of RMBS.

Manager Activity: Autos Book Runner Amount (US$ Mil) Rank Mkt.

Standard & Poor's, along with Moody's Investors Service and Fitch Ratings, downgraded billions of dollars structured transactions in the summer of 2007, resulting in a wave of criticism. So when Deven Sharma was named S&P president on Sept. 1 of that year, he kicked off a reform program that continues today.

Under the brand esoteric comes an array of asset classes. Right now the industry is seeing whole business deals such as the issuance of a $220 million transaction for Church's Chicken earlier this year.

The Treasury Market Pratice Group (TMPG) published it's proposed fails charge for agency MBS and debt set to take effect early next year. The trade group is taking comments on the proposal until June 10.

Fannie Mae and Freddie Mac have agreed to "single track" delinquent borrowers for at least 120 days before servicers begin foreclosure processing under new loss mitigation guidelines sanctioned by the GSE regulator.

The combined earnings of the 12 Federal Home Loan Banks (FHLBs) totaled $358 million in the first quarter, up 10% from a year ago, the FHLB Office of Finance reported Friday morning.But bad investments in private-label MBS continue to be a drag on earnings at several banks and it pushed the Seattle bank into the loss column again.

CMBS investors should brace for one of the largest note auctions in mid-May, according to a report from Barclays Capital.

Recent collateral requirements from the European Central Bank (ECB) appear to be creating, among other things, some demand for new second ratings of older MBS and potentially other deals.

For banks looking to sell nonperforming assets, pricing realities are not ideal. But they have become increasingly tolerable.

Although a handful of bidders have pondered the thought of buying roughly $40 billion of servicing rights being peddled by HSBC Bank USA, it appears the deal has stalled for now.

Michael Wade will be leaving Credit Suisse. Wade was hired by Credit Suisse from Barclays Capital about a year ago as a managing director and co-head of asset finance in the global markets solutions group along with Tricia Hazelwood.

Home equity loans were part and parcel of the mortgage bubble, and the bust has transformed them into one of the mostsignificant loose ends in a crisis that still appears far from resolution.

The Securities and Exchange Commission (SEC) today voted unanimously to propose amendments that would remove references to credit ratings in several rules under the Exchange Act.