Securitization

The Treasury Department, to date, has spent $150 billion of taxpayer money investing in preferred shares of 52 different institutions, outgoing secretary Henry Paulson said Monday afternoon.

In its 2009 MBS outlook, JPMorgan Securities analysts recommended an overweight to MBS versus Treasurys heading into the new year.

In the first major legal challenge to mass loan modification programs, bondholders have filed a lawsuit claiming Countrywide Financial Corp. cannot change mortgage terms without their permission.

In a report relased today, Merrill Lynch analysts noted DBSI's CMBS exposure. DBSI is a real estate company specializing in TIC transactions. The firm filed for Chapter 11 bankruptcy protection on Nov. 10.

Fannie Mae's use of HomeSaver advances to cure delinquent loans in securitized pools peaked in June and July and two-thirds of the personal loans went to nonprime borrowers, according to a report by the Federal Housing Finance Agency.

The Treasury Department has provided Freddie Mac with a $13.8 billion infusion to wipe out a capital deficit and keep the government sponsored enterprise afloat.

Manager Activity: AutosFull Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market

Morgan Joseph & Co., a full-service investment bank, expanded the firm’s analytics and trading group that operate in the secondary market for fixed-income structured products by hiring two new members to the team, as announced today by Matthew Stedman, the firm's head of sales and trading.

"Since the beginning of 2007, we have seen a tightening of lending standards and a reduction of introductory offers to new borrowers, which has set the ground for improvement in performance and better positioned these structures to weather a downturn," said Anca Gagea, ABS research analyst at Barclays Capital. "That said, the biggest driver for consumer asset performance is unemployment, and we are seeing that go up in the U.K., which has begun to have an impact on performance."

Northern Rock's Granite Master Trust breached its non-asset trigger, because the current-seller share fell below the minimum on two consecutive distribution dates. The breach is the result of a strategic decision by Northern Rock's management.

Securities Industry and Financial Markets Association (SIFMA) announced the launch of its European Covered Bond Dealers Association (ECBDA).

The U.S. Department of the Treasury and the Federal Reserve announced last Tuesday a program meant to inject liquidity into the beleaguered financial system.

In a market where financial institutions are scrambling to shore up capital with asset sales, firms that facilitate these transactions successfully are poised to emerge from the recession with deeper pockets.

The fallout in the ABS and MBS markets has triggered the development of a new trend: structured finance professionals lending their expertise to asset management shops.

Despite the lack of new deal flow, rating agencies are hard at work making improvements to their evaluation processes in hope of luring back investor confidence and restarting new issuance.

November remittance reports showed continuing performance deterioration, which was largely expected by Street analysts, though still dramatic.

The CMBS market experienced what analysts called a meltdown recently, as super senior triple-A paper saw a significant fall in price.

The market was in brighter spirits before the Thanksgiving holiday, as ABS market participants quite fittingly gave thanks to U.S. Treasury Secretary Henry Paulson, who rolled out a Term Asset-Backed Securities Loan Facility (TALF) under which The Federal Reserve Bank of New York will establish a $200 billion one-year, non-recourse lending facility for newly or recently originated triple-A rated consumer ABS (see story p. 16). This covers auto, credit card, student loans and small business loans that are guaranteed by the U.S. Small Business Administration.

November remittance reports showed a continuing performance deterioration, which was largely expected by Street analysts.

Troubled by the persistently high cost of funding for the GSEs, the Federal Reserve Board said Tuesday it would begin purchasing the debt of Fannie Mae, Freddie Mac and the Federal Home Loan Banks next week.