Securitization

Conventional prepayment speeds slowed in September versus expectations of a small increase. Consensus was looking for a 4% increase; however, speeds declined around 10%. Factors influencing the September report and hence the bias towards slightly faster speeds were slightly lower average 30-year mortgage rates at 5.19% in August versus 5.22% in July, while the Refi Index averaged 6.4% higher on the month to 2056. Day count was unchanged from August at 21 days.

The Commercial Mortgage Securities Association (CMSA) will testify today before the U.S. Senate Banking Committee where it will share its perspectives on issues facing the $3.5 billion commercial real estate finance market.

September was a poor month for ABS issuance in Mexico, but the pipeline portends a few sizable deals up ahead. The only transactions placed in the public market was the second RMBS from FOVISSSTE, basically the piggybank for government employees in the country, and a negligibly-sized re-opening of an RBMS from Hipotecaria Total (for description of Total’s unique approach to RMBS see ASR 2/4/08).

The Financial Services Authority (FSA) today published its final rules on the liquidity requirements expected of firms.

Market prices within U.S. subprime RMBS continue to show signs of stabilization, although there is little sign of any increase in value, according to Fitch Solutions in its latest CDS of RMBS indices results.

Ford Credit Canada Limited announced today that it completed a securitization of a pool of retail conditional sale contracts, receiving immediately available proceeds of approximately $700 million CAD ($658 million).

Natural-gas company Exterran Partners said it plans to borrow about $58 million under a new asset-backed securitization facility and issue about $86 million of new equity to Exterran Holdings.

The rapid deterioration in the employment market in Spain has been mirrored by the sharp increase in arrears for Spanish RMBS transactions with Moody’s Investors Services 60+ days in arrears in Q2 09 at 2.8% compared with 1.5% a year ago, according to analysts at Barclays Capital.

Bank of America Merrill Lynch points out that short PACs off premium 10/20s offer very attractive yield profiles currently. This is the result of concerns regarding the potential for higher prepayment speeds in 10/20 collateral through buyouts and loan modifications.

Three more investment funds — with combined commitments of at least $1.5 billion — have applied for and received approval from the Treasury Department to participate in the 'Public-Private Investment Program' in regard to buying troubled securities.

The Federal Reserve Bank of New York will have the authority to make rules that could expand the number of credit rating agencies working with the Term Asset-Backed Securities Loan Facility (TALF) under a proposal released by the central bank Monday.

Moody's Investors Service published a special comment today discussing the implications of a possible bankruptcy of the CIT Group Inc. on sixteen ABS transactions where CIT, through its subsidiaries, acts as the servicer, master servicer, administrator, or servicing administrator.

The increased numbers of European banks and other originators making tender offers to buy back their structured finance issues primarily reflect originators taking advantage of opportunities to optimize their funding profiles and capital structure.

The American Securitization Forum (ASF) last weeksubmitted a letter to federal banking regulators.

A sense of relief is percolating through the market of Shariah-compliant bonds, known as sukuks.

The Internal Revenue Service's update on REMIC rules that will now allow for more commercial loan modifications is welcomed by the industry. However, the 80% property valuation test required at the time of the modification could bring punitive consequences.

A massive leap in the values of "toxic" MBS since March - albeit from record lows - may lessen the urgency prompting the U.S. Department of the Treasury's Public-Private Investment Program (PPIP). However, it may also dampen investors' returns and increase their risk.

The well-documented struggles of the U.S. economy continue to pose increased difficulties for borrowers underlying U.S. middle market CLOs. Whereas early middle market CLOs benefited from solid performance of underlying middle market loans, the economic downturn has affected the viability of middle market companies resulting in a significant increase in defaults, which has contributed to negative rating pressures on middle market CLOs.

A new financing vehicle is poised to take off in Mexico, and it has structured finance players scrambling to make deals. What's interesting is that, at its core, it's an equity product.

Early last summer, the Obama administration proposed a sweeping revision of U.S. financial regulation. Among its notable features are the elevation of the Federal Reserve to the role of primary financial regulator and the creation of a Financial Services Oversight Council to monitor so-called systemic risks, i.e., those exposures that risk a cascading series of failures based on the collapse of one entity.