Securitization

A couple of British and Australian RMBS deals recently distinguished themselves in the issuance market, a sign for some in the asset securitization business that a wave of such products could be on the way.

Churchill Financial is looking to increase its assets. The New York-based middle-market finance company is not only bulking up its portfolio, but also adding breadth with the recent opening of a Chicago office and several new additions to its team in New York.

In examining the link between the rate of home price inflation and residential mortgage default rates for subprime loans, Fitch Ratings demonstrates the strong negative correlation between the two. In short, high rates of home price inflation (HPI) helps keep subprime default rates low. Conversely, slow home price growth and home price deflation drives defaults higher as is the case with the 2006 subprime vintage. In California, home prices based on the weighted average of the loans' geographic concentration are relatively flat, growing by a meager 0.2% between 4Q05 and 4Q06.

After taking a break in April, the three ABX.HE indices experienced an at-times brutal decline in quality last month, with 30-day and 60-day delinquencies on the rise for all indices, while analysts feared that the newest market index, ABX 07-01, was deteriorating far faster than its more established sister indices.

Moody's Investors Service said in a report last week that despite concerns about subprime mortgage deterioration spilling over, the credit card sector's performance is still within the rating agency's expectations. In fact, Moody's expects no near term impact on ratings for credit card issuers and ABS.

Market interest was strong and expectations high last week before Academic Loan Group priced its $1.3 billion ALG Student Loan Trust II.

Performance of ABS deals remained strong through April, but macroeconomic concerns might eventually weaken performance later in 2007.

Ohio looks to be next on the list of state governments securitizing their share of the $200 billion national tobacco settlement. The Buckeye State is considering a deal that, if approved, could provide a massive payday to underwriters and a large chunk of new tobacco-related ABS.

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues JPMorgan Securities 8,539.2 1 31.5 10 Wachovia Securities 8,416.4 2 31.0 8 Banc of America Securities 6,760.7 3 24.9 6 ABN AMRO 5,149.8 4 19.0 4 Barclays Capital 4,837.2 5 17.8 4 RBS Greenwich Capital 4,561.5 6 16.8 4 Deutsche Bank Securities 3,706.9 7 13.7 3 Credit Suisse Securities 3,631.1 8 13.4 3 Morgan Stanley 2,870.3 9 10.6 3 HSBC Securities 2,058.0 10 7.6 2 Industry Total 27,115.7 - 100.0 30 Source: Thomson Financial

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues Merrill Lynch 27,602.0 1 19.9 31 Citigroup Global Markets 17,752.5 2 12.8 25 JPMorgan Securities 10,756.0 3 7.8 19 Wachovia Securities 9,636.8 4 7.0 17 Morgan Stanley 9,493.8 5 6.8 38 UBS 8,134.0 6 5.9 14 Barclays Capital 8,133.7 7 5.9 10 Deutsche Bank Securities 7,546.6 8 5.4 17 Banc of America Securities 7,166.7 9 5.2 8 Bear Stearns 6,767.9 10 4.9 13 Industry Total 138,704.3 - 100.0 239 Source: Thomson Financial

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues JPMorgan Securities 10,405.0 1 26.8 17 Banc of America Securities 9,415.0 2 24.3 16 Citigroup Global Markets 7,500.0 3 19.3 9 Morgan Stanley 5,252.6 4 13.5 6 Credit Suisse 2,842.6 5 7.3 4 Deutsche Bank Securities 2,575.0 6 6.6 8 Barclays Capital 2,350.0 7 6.1 4 ABN AMRO 2,242.6 8 5.8 2 RBS Greenwich Capital 2,075.0 9 5.3 6 Wachovia Securities 2,025.0 10 5.2 4 Industry Total 38,815.3 - 100.0 58 Source: Thomson Financial

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues Countrywide Securities 21,586.4 1 13.8 20 RBS Greenwich Capital 21,197.3 2 13.5 24 Merrill Lynch 18,763.7 3 12.0 17 Morgan Stanley 15,557.6 4 9.9 15 Lehman Brothers 14,573.7 5 9.3 18 Banc of America Securities 14,389.0 6 9.2 15 Bear Stearns 13,052.8 7 8.3 14 Citigroup Global Markets 13,026.8 8 8.3 20 Deutsche Bank Securities 10,264.8 9 6.5 12 JPMorgan Securities 8,011.0 10 5.1 9 Industry Total 156,888.8 - 100.0 194 Source: Thomson Financial

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues JPMorgan Securities 11,994.9 1 45.7 4 Banc of America Securities 11,558.4 2 44.0 4 Barclays Capital 8,836.0 3 33.7 2 Credit Suisse 8,707.8 4 33.2 3 Deutsche Bank Securities 7,729.2 4 29.4 3 Morgan Stanley 6,270.3 6 23.9 2 Goldman Sachs 5,842.0 7 22.3 2 Wachovia Securities 4,806.0 8 18.3 1 Lehman Brothers 4,142.0 9 15.8 1 RBS Greenwich Capital 3,051.4 10 11.6 1 Industry Total 26,248.6 - 100.0 11 Source: Thomson Financial

auto ABS 8% credit card ABS 12% equipment ABS 1% real estate ABS 70% student loan ABS 9% trade receivables 0% utilities ABS 0%

Investors poured into the LCDX index during its first days of trading last week, as hedge funds jumped at the opportunity to short the leveraged loan market and dealers looked to hedge exposure. Trading volume in the LCDX index reached $11.1 billion on Tuesday, when it was unveiled, according to Markit Group.

Three months after six of its structured finance executives resigned to launch a CDO asset management company and hedge fund, BMO Capital Markets has replenished the team with eight new hires.

The ABS market was a lot kinder toward the subprime MBS sector last week. Perhaps it sprang from indications that, for the first time, agency buy-side participants bought subprime MBS bonds with ratings expected to be below triple-A.

For a long while during the recent spate of subprime MBS volatility, the most ardent proponents of credit card ABS told the industry that there was no discernible risk of contagion from troubled mortgage-backed securities products.

New York Attorney General Andrew Cuomo's investigation into mortgage broker influence on property values continued to grab headlines last week when he issued a subpoena to First American Corp.'s real estate appraisal unit eAppraiseIT. The attorney general ordered an inquiry about appraisals the unit performed in the state.

As a number of the nation's largest subprime mortgage companies parcel off servicing rights, investors are becoming increasingly concerned over the ability for the lenders to provide seamless servicing transitions.