Securitization

The market saw further downgrades in U.K. credit card securitizations. According to data published by Barclays Capital, portfolio yields have increased in all U.K. credit card trusts in March, on average to 19.20% from 18.69%.

Jefferies & Co. hired Andrew Peisch as the firm’s fixed income division as a managing director and co-head of MBS/ABS banking and origination.

A few months after announcing its exit from warehouse lending, JPMorgan Chase has decided to stay in the business after all, National Mortgage News (NMN) has learned.

With the secondary market for subprime loans moribund, one lender is experimenting with innovative, nonbank services that could make its debt easier to sell.The subprime auto lender Consumer Portfolio Services said the poor economy has driven down its origination and repayment rates. Since last week it has announced plans to participate in initiatives aimed at addressing both concerns: a mobile phone billing service that could make borrowers more likely to pay their bills and a secondary market that lets consumers buy its notes.Observers said lenders, and especially subprime lenders, are finding it increasingly difficult to resell their loans, and they predicted that financial companies would be interested in any new service that could increase liquidity.Robert E. Riedl, a senior vice president at CPS and its chief investment officer, said the Irvine, Calif., company's decision to use the services was a pragmatic response to a decline in lending.In 2007, CPS originated $100 million a month of new contracts; in 2008, it dropped below $20 million, and today it's "quite a bit less," he said in an interview Tuesday. "What's the cliche? 'Necessity is the mother of invention.' "CPS is the first company to participate in a secondary market for loans that was introduced last week by the peer-to-peer lender Prosper Marketplace Inc. In this arrangement, Prosper users can take over the debt, but CPS will continue to handle the servicing.Prosper's main business is facilitating loans online between individuals, and it is also developing a system that will let its lenders buy and sell the notes they have funded through its Web site.Prosper has said that offering consumers the chance to buy loans issued by banks and other traditional lenders could provide an important new source of liquidity. (The secondary market is currently open only to lenders in California, though Prosper plans to take it nationwide once it gets regulatory approval.)Riedl said liquidity is exactly what CPS needs. Many of the traditional ways to sell his subprime debt have dried up, he said, forcing his company to reevaluate its options. "We have for the last year or so looked at a lot of different ways of funding our originations."Though several initiatives aim at loosening up the credit markets, Riedl said that his small, subprime auto lender is not the government's top priority. "While government programs seem to be making some progress, clearly there's a long way to go before it makes its way to us," he said. "Prosper is another idea, kind of a fairly cutting-edge idea" that can address his liquidity issues.A potential hurdle is credit quality. Loans sold through Prosper must be current and borrowers must have made at least three payments. Prosper's lenders tend to favor the creditworthy and may be wary of CPS' subprime loans.The mobile phone service could address this. CPS said last week it was testing a service from Western Union Co. that delivers invoices, and lets recipients pay them, by text messages.Marc DeCastro, a research manager at Financial Insight, a unit ofInternational Data Group, said mobile phones could boost collection rates. "People are much more prone to react to something on a mobile message," which is interactive, than to a static invoice sent by mail, he said.Bobbie Britting, a research director in the consumer lending practice at TowerGroup Inc., an independent research unit of MasterCard, said the mobile service shows that CPS is committed to keeping payments coming in, which could makes its loans attractive to Prosper's users. "You're more likely to find an investor to buy your portfolio if you say to them: 'I've got all these ways of staying in touch with my customer and making it easier for my customer to pay their bill.' "Britting said subprime lenders are struggling with liquidity. Companies like CPS "really have nowhere to go to sell their loan portfolios to get new money to make new loans," she said.Though CPS is the first to explore these new services, she expects others will follow suit. "Companies are absolutely starting to do a lot more in that area," she said.

Though the stress tests could be dismissed as little more than political theater, even the harshest critics concede they accomplished something important: breathing room.

Ares Management, a Los Angeles based investment manager, is looking to acquire 22 pieces CLOs worth as much as $767 million.

FBR Capital Markets (FBR), Arlington, Va., is projecting Radian Group, Philadelphia, will return to profitability in 2010.

Declining house prices are undermining the performance of the Federal Housing Administration (FHA) reverse mortgage program, the Obama administration warned.

Servicing portfolio growth and cost cutting has resulted in Ocwen Financial Corp.'s first-quarter profit tripling from a year earlier, to $15.1 million.

Sallie Mae announced that it had priced a Term ABS Loan Facility (TALF)-eligible $2.6 billion securitization backed by private student loans.

After two years of work, amendments to the Cedulas Hipotecarias framework have been completed. On May 2, a publication of the royal decree 716/2009 in Spain’s Boletín Oficial Del Estado stated the terms of the amendments.

The number of rating agency downgrades and reviews are expected to increase over the next year or so, according to Barclays Capital analysts.

The European Parliament on Wednesday voted in favor of updating the rules that the European Union (EU) banks will have to comply with beginning in 2010. The votes were broken into 454 in favor, 106 against and 25 abstentions.

The Depository Trust & Clearing Corp. is recommending daily trade netting for TBA MBS transactions.

The Senate has passed a housing bill to jumpstart a $300 billion Federal Housing Administration (FHA) program refinancing program and shield mortgage servicers from investor lawsuits.

Senate Banking Committee Chairman Chris Dodd said he could bring a card bill up for a vote in the full Senate as soon as this week — and he may proceed even without a deal with Republicans.

Ginnie Mae posted $34.5 billion in total MBS issuance for April, according to a release from the agency.

Jefferies Group has futher expanded its ABS and MBS staff by making four hires in trading and sales.

With the back up in rates, questions are rising about convexity selling on a further sell-off that in turn would lead to even higher interest rates.

Bond insurer Assured Guaranty, Hamilton, Bermuda, is facing uncertainty about mortgage and other structured finance exposures that it said it believes were too pessimistically assessed in recent downgrades.