Securitization

It was a record breaking week in terms of the 10-year note yield, lower coupon MBS prices and mortgage rates.

The Office of the Comptroller of the Currency (OCC) "underestimated" the risk of poor foreclosure practices at national banks and did not devote enough examination resources to identify those problems, according to the agency's chief watchdog.

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

Although mortgage underwriting standards were much too loose during the “go-go” years of 2004 to 2007, the pendulum on credit standards has swung too far the other way, according to a new report from Amherst Securities Group.

Is Ginnie Mae actually making progress in clearing its backlog of issuer applications? Answer: It all depends on who you ask.

Clopton Capital announced yet another product aimed at boosting lending in commercial real estate (CRE).

Moody's Investors Service will rate the $259 million of student loan ABS notes to be issued by the State of New Jersey's Higher Education Student Assistance Authority (HESAA).

Standard & Poor's has updated its criteria for assessing counterparty risk in covered bond programs, which could affect up to 50% of outstanding ratings on covered bonds.

In a twist on the old cliche about Brazil, it seems at times that covered bonds in Latin America are the instrument of the future, and always will be.

At the 2012 SiLAS conference hosted by Euromoney Seminars and LatinFinance, a panel on rig lease receivable deals sparked hope that the architecture of this sector could be applied to other businesses.

While participants of the 2012 SiLAS conference hosted by Euromoney Seminars and LatinFinance were happy to move on from the Mexico-centric talk of previous years, more than a few players were still buzzing about the plans by Mexican originator and recurring RMBS issuer Infonavit to eventually morph into an investor. (See graph at right for projected cash flows.)

Bankers are holding out hope for a last minute 'fix' to new capital requirements that will make it much less attractive for European insurers to hold ABS. Insurance companies have become important buyers of European ABS since the financial crisis.

Greece's RMBS sector would be one of the victims of the country's exit from the eurozone, which appears increasingly likely in the run-up to June 17 elections between parties supporting and opposing austerity measures, a condition of the country's bailout.

Middle market CLOs have remained relatively scarce since the financial crisis, as it is still difficult for deal sponsors to get financing to warehouse loans to small and medium-sized companies.

The news of massive trading losses in JPMorgan's Chief Investment Office renewed calls for strict implementation of the Volcker Rule, the section of the Dodd-Frank Act restricting banks from proprietary trading. In my mind, the episode highlights the importance of intelligent and comprehensive risk-management procedures. While provisions such as the Volcker Rule can play a useful role, they cannot serve the desired purpose of mitigating risks to the financial system without robust risk-management standards enforced by regulators.

The cost of a college education continues to soar, and the interest rate on government-subsidized student loans is set to double. It would seem like a perfect recipe for more private lending and, by extension, for more securitization of private student loans, which has fallen sharply since the federal government took over this corner of the market two years ago.

Originators of private student loans can't seem to catch a break. Two years ago, the federal government stopped guaranteeing these loans, leaving them unsecured; more recently, there's been a push in Congress to make student loans dischargeable in bankruptcy. The loans are also attracting scrutiny from the recently empowered Consumer Finance Protection Bureau.

Brazil's housing market boom continues to make headlines. From January 2008 through April 2012, home prices in Sao Paulo and Rio de Janeiro jumped 135% and 169%, respectively, according to the FipeZap Index, which tracks prices every month in the country's seven biggest cities.

Mention cumulative charge-offs in single-digit basis points and premiums of more than 100 basis points for 'AAA'-rated bonds, and institutional investors are bound to scoff.

Despite the ongoing euro area debt crisis, European auto ABS have remained a stable and active asset class with continued investor interest for standard auto assets (auto loan and auto lease receivables to private individuals and SMEs) over the last few years. Over the past 18 months, issuance in this asset class has come predominantly from Germany, France and the U.K. More recently, Norwegian and Swiss receivables have entered this asset class.