Securitization

Thornburg Mortgage has been making headlines for all sorts of reasons lately. The most notable is that it received and met margin calls on its reverse repurchase agreements that exceeded $300 million between Feb. 14 and Feb. 27.

Nelson Soares, a longtime managing director at Lehman Brothers, who led its U.S. securitization group, left the company earlier this week, say market sources. Soares was also active with the American Securitization Forum and was elected treasurer in a term that expires in 2010. In conjunction with his departure from Lehman, Soares resigned from his position as ASF treasurer.

Citigroup said it will be making a series of changes to its U.S. mortgage businesses that include reducing its residential mortgage assets by roughly $45 billion over the next 12 months, a 20% decrease from December 2007 levels. The bank also said it will cut the amount of new loans held in its portfolio by more than 50% over the next year. In January, Citi announced that it had formed an "end-to-end U.S. residential mortgage business" that includes origination, servicing and capital markets securitization execution. Under this umbrella business, Citi will consolidate its U.S. mortgage operations, policies and procedures, which the bank said will appropriately align its mortgage operations and exposure. Citi also said it will integrate all residential mortgage operations under the CitiMortgage name, including CitiMortgage, Citi Home Equity and Citi Residential Lending. The new platform will have a single set of product offerings with coordinated pricing and business practices, a common sales organization with a single leader for each customer segment, a consolidated middle office support structure with a common CFO, credit head and human resources lead, and staffing levels that are reflective of current market conditions, the bank said. Among changes to the bank's underwriting plans include an increase in the levels of loans sold to the GSE's or securitized to approximately 90% of production by Q3 of this year, up from 65% in 2007. CitiMortgage also said it will no longer offer mortgage loans for investment properties on three- and four-family homes and has reduced its bulk loan purchases. The company also said it has eliminated 2/28 and 3/27 ARMs as well as home equity loans behind lower FICO score first mortgages. In addition, CitiMortgage reduced the volume of second mortgage origination and reduced third party second lien loans by over 90% from a year ago.

In a testimony today before the Committee on Banking, Housing and Urban Affairs, National Association of Realtors' Public Policy Chair Vincent Malta argued that the national GSE conforming loan limit should be permanently raised to 625,500 or higher. Malta also suggested raising the limits an additional increase of 125% of the local median home-sales price in high-cost areas. "Fannie Mae and Freddie Mac provide liquidly and stability in the mortgage market and are vital to the housing sector," he said. Malta urged that such a move would increase home sales by nearly 350,000, lower inventories and increase home prices by 2% to 3%. It would also result in as many as 210,000 fewer foreclosures, and more than 500,000 borrowers would be able to refinance into lower interest rate loans, he said.

Alston & Bird has formed a multidisciplinary taskforce comprising 50 partners to assist U.S. clients with issues resulting from the credit crunch. The subprime taskforce is made up of attorneys from across the firm who specialize in financial litigation, securitization, class actions, finance, insurance coverage disputes, real estate, bankruptcy, workouts, structured products, retirement plans, banking regulation and derivatives. The group is headed by Brian Cox, whos is a finance partner from the law firm's Charlotte office, as well as John Latham, a securities litigation partner in the Atlanta office. The firm's release said that contacts in the New York office are Gary Roth, a partner in the financial services group, as well as Michael Johnson, a litigation partner.

FBR Capital Markets announced today the appointment of Bradley Wright as chief financial officer and executive vice president. Wright joins FBR from Bear Stearns, where he was a senior managing director in charge of finance for the private client services business. He joined Bear in 1996 following 14 years at Price Waterhouse, where he was part of the capital markets and treasury division. "Brad's extensive knowledge and experience in the financial services industry will be invaluable as we continue to maximize the strength of our balance sheet and execute our strategic plan," said Eric Billings, FBR chairman and chief executive. FBR is the majority-owned, public capital markets subsidiary of Friedman, Billings, Ramsey Group. Both are based in Arlington, Va., and share a chairman and CEO, Billings. Kurt Harrington will continue as CFO and executive vice president of Friedman, Billings, Ramsey.

Former Credit Suisse director Jonathan Clark joined SLM Corp. as a senior vice president of corporate finance. Clark will lead the company's unsecured debt issuance and treasury operations. He will also assist the ABS team, according to a company statement. Clark was part of a recruitment haul at Credit Suisse in 2000, when the investment bank appointed Joe Donovan and Greg Richter, among others, to its asset finance group. Clark also worked at Prudential Securities, First Boston and Dean Witter. The student lender also hired John Hewes as executive vice president and chief credit officer, a role in which he will oversee the company's private student loan underwriting policies and credit risk management. For the last 22 years, Hewes led the consumer finance and business lending divisions at MBNA, one of the world's largest credit card issuers.

Fremont General Corp. said today that it received default notices on about $3.15 billion of loans it sold in March 2007. The Brea, Calif-based bank has received notices from two investors who bought the mortgages, which said Fremont violated sales terms when its tangible net worth dipped to less than $250 million. The mortgage firm expects its tangible net worth will be below $250 million when it reports 4Q07 financial results. The company said it might need to record write-downs and add to reserves for the quarter, which will further reducing its net worth. Both Moody's Investors Service and Standard & Poor's cut their ratings on Fremont as a result of a deferred dividend as well as weak liquidity. Moody's cut its rating to 'Ca' from 'Caa3' and S&P cut Fremont General to 'CCC-' from 'CCC+.'

European securitization investors complain that they are being seen as childlike - they say it's not childish fear that's keeping them away, but rather not knowing what the final outcome will be once all the bad news is finally over.

ABS issuance slowed to a crawl since the last press time, yielding just a $1 billion Sallie Mae deal on Feb. 22, and a $180 million ratepayer-backed ABS last Thursday.

Cleco Power, a Louisiana utility company, issued bonds last week that will finance the cost of repairs of more than $160 million damages sustained after hurricanes Katrina and Rita devastated the region more than three years ago.

While one could hardly call the CLO market healthy, the rumors of its demise may be slightly exaggerated. It's not impossible to get a CLO transaction done, though a significantly easier time will be had by all if arrangers stay realistic about pricing and forget going the market value route, sources said. This market is going for cash.

Citigroup made news last December when it decided to consolidate about $49 billion in SIV assets onto its balance sheet. In its most recent 10-K filing, released on Feb. 22, Citigroup revealed that it had consolidated significant interests in CDO assets.

February remittance data offered almost no surprises, which, given the state of the struggling economy, means more bad news. The increase in delinquencies and foreclosures came with a slowdown in prepayments, although the rate of some losses has tailed off from the previous month.

Citigroup announced last week that Brian Leach will assume the role of chief risk officer, reporting to Chief Executive Officer Vikram Pandit. Leach will also become acting chief risk officer for the institutional clients group.

Freddie Mac's new, stricter guidelines for the delivery fee structure of 30-year mortgages might hinder refinancings.

The Office of Federal Housing Enterprise Oversight (OFHEO) reported that home prices declined 1.3% (5.2% annualized) in its seasonally adjusted purchase-only 4Q07 House Price Index compared with a 0.3% (1.4% annualized) decline in the third quarter.

BBVA Colombia has a consumer loan transaction in the works that's the first of its kind in the country. The only deals that have been done in the vicinity of this asset class is a securitization of payroll-deducted loans two years ago and a credit card transaction about ten years ago, according to a Bogota analyst familiar with the sector.

Standard Chartered SIV Whistlejacket has defaulted on its obligations and might be set for an orderly unwind.

BBVA Bancomer has registered a new RMBS with Mexican regulators, and mortgage insurance from Genworth is attached.