Securitization

Traditional non-mortgage consumer assets continue to dominate U.S. ABCP conduit holdings while exposures to riskier assets have dropped well off their highs of the past two years. The falloff in exposure to assets such as RMBS and CDOs is not surprising, as many sponsors took proactive measures over the past two years to reduce, remove, or provide more support to certain exposures in an effort to allay investor concerns.

Following a spring that was on life support, Mexico's structured finance market sprang to life in late June and into July. A clutch of significant deals closed and more entered the pipeline.

Jones Day has hired Joel Telpner as a partner in its banking and finance practice. He will be based in the New York office.

Some securitization players are hanging their hopes of a market recovery on the Term ABS Loan Facility (TALF) and, perhaps even more, on the Public Private Investment Program (PPIP).

The U.S. government continues to reinforce its commitment to preserving the securitization market.

While both the real estate markets and mortgage credit performance have shown signs of bottoming out, the foreclosure picture remains grim. In its delinquency report for the first quarter of 2009, the Mortgage Bankers Association reported that 3.85% of the loans in their population were in some form of foreclosure, and RealtyTrac notes that just under two million homes in the U.S. were in foreclosure as of June. Considering that the annualized rate of existing home sales in June was 4.8 million homes, the size of the foreclosure pipeline is astonishing.

The House, voting 237 to 185, approved legislation that is intended to better align executive compensation with performance.

Almost a year since the idea was first raised by policymakers as a solution to the credit crisis, the Federal Deposit Insurance Corp. went forward Friday with a plan to auction off toxic assets from a failed bank.

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

FBR Capital Markets Corp. entered into a definitive agreement to acquire Watch Hill Partners, a boutique corporate finance advisory practice in New York.

Maxim Group expanded its fixed-income team with three additions, the New York-based investment bank announced today. The three new executives will all serve as traders.

The federal government has put up what a regulator said was a total of about $1 trillion to prop up Fannie Mae and Freddie Mac through capital infusions and purchases of their corporate debt and MBS since the two mortgage giants were placed in conservatorships last September.

Moody's Investors Service said its negative outlook for Australian residential and CMBS and ABS could persist for another 12 to 18 months.

Close to $500 billion or 6% of U.S. CMBS are currently in special servicing and that amount could double by the end of the year, according to Fitch Ratings.

Societe Generale Corporate & Investment Banking made two senior appointments in its Asia Pacific flow fixed-income and currencies team to head the bank’s push into flow business.

With private equity becoming harder to raise, investors hoping to clean up from the mortgage market's wreckage are turning to a vehicle that has fallen in and out of vogue over the years: the real estate investment trust.

Legislation to regulate derivatives appeared to be on the fast track Thursday as two House committee chairman said they were close to a final agreement on a bill that would significantly curb trading of credit-default swaps and provide strong incentives for banks to bring contracts on to regulated exchanges.

Government Problem-Loan Principal-Reduction Guidelines to ChangeStarting August 15, servicers can reduce the principal amount of a troubled Federal Housing Administration-insured mortgage by up to 30% so the homeowners' monthly payments are reduced to 31% of income. "Tens of thousands of FHA borrowers will now be able to modify their mortgages," said HUD secretary Shaun Donovan. Under the new program, borrowers have to be 30-days delinquent to qualify and traditional FHA loss mitigation options would not be effective. "There is no net present value test for eligibility," the guidelines say. However, borrowers have to make timely payments during a three-month trial before the modification is finalized. Mortgage banking consultant Brian Chappelle said the new program should be able to help a high percentage of FHA troubled borrowers because their loans were not underwritten based on stated incomes or second mortgages to avoid paying mortgage insurance. Servicers will receive $1,250 incentive payments for completing these FHA modifications.Starting August 15, servicers can reduce the principal amount of a troubled Federal Housing Administration-insured mortgage by up to 30% so the homeowners' monthly payments are reduced to 31% of income.

PennyMac Raises $320 Million in Initial Public OfferingPennyMac Mortgage Investment Trust, Calabasas Hills, Calif., said its initial public offering of 16 million common shares has been priced at $20 per share, raising $320 million. The amount raised was somewhat below expectations, according to combined news reports. PennyMac Mortgage Investment Trust intends to use the net proceeds from the offerings to purchase residential mortgages and mortgage-related assets, a substantial amount of which may be distressed. Merrill Lynch & Co., Credit Suisse Securities (USA) LLC and Deutsche Bank Securities are the joint book-running managers for the offering. JMP Securities and Stifel Nicolaus are acting as co-managers. PennyMac Mortgage Investment Trust trades on New York Stock Exchange under the ticker symbol "PMT."PennyMac Mortgage Investment Trust, Calabasas Hills, Calif., said its initial public offering of 16 million common shares has been priced at $20 per share, raising $320 million.

The GSE regulator is taking several steps in response to the continued deterioration of Federal Home Loan Bank investments in private-label MBS investments and he is even considering the creation of an insurance fund to prop up undercapitalized banks. "The Federal Housing Finance Agency in connection with the banks is studying the merits of establishing an insurance fund for the Federal Home Loan Banks," FHFA director James Lockhart said. The fund would "insure the timely payment of principal and interest on their obligations, facilitate mergers if necessary and provide capital assistance to under-capitalized FHLBanks," he said during a speech at the National Press Club in Washington. The director noted that FHFA is developing a framework for supervisory decisions on capital distributions and it is closely monitoring conditions at the FHLBanks where impairments on private-label securities (recorded as "other than comprehensive income") exceed retained earnings. In addition, the agency is issuing a proposal to expand the board of directors of the Office of Finance to include all 12 presidents of the FHLBanks and five independent directors.