RMBS
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Seasoned QMs proposed
Sector developments and company hires
Seasoned QMs proposed
Market Moves 20 August 2020
The CFPB has issued a notice of proposed rulemaking (NPRM) to create a new category of seasoned qualified mortgages, with the aim of encouraging innovation and to help ensure access to a responsible, affordable mortgage credit market. To be considered a seasoned QM under the proposal, loans would have to be first-lien, fixed-rate covered transactions that have .......
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Freddie, Fannie fight back
The GSEs have come out swinging after widespread denunciation of the LLPA
Fannie Mae and Freddie Mac have offered a robust defence of their August 12 announcement to impose a 50bp loan level price adjustment (LLPA) on mortgage refinancing from September 1, which has elicited a firestorm of criticism from wide sections of the industry and government.
The GSEs yesterday issued a lengthy joint statement which stressed that the decision to pass .......
News 20 August 2020
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Lack of transparency
Reporting discrepancies cause confusion
US RMBS reporting discrepancies are becoming a source of confusion among investors, with some shelves and servicers not always reporting loans in forbearance as delinquent. These discrepancies appear to be more visible in the reperforming loan space, where there has been a significant increase in modified loans with ‘current’ status that are not amortising.
To address the increased .......
News Analysis 20 August 2020
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SSRT trio revealed
Sector developments and company hires
SSRT trio revealed
Market Moves 19 August 2020
S&P has published its ratings and research on three previously privately-rated risk transfer RMBS issued by Freddie Mac, at the issuer's request. The trio of deals are STACR Single-Seller Risk Transfer (SSRT) Series 2019-CS02 (sized at US$245.2m and closed in March 2019), 2020-CS01 (US$578.36m; April) and 2020-CS02 (US$190.78m; July). The transactions transfer a portion of the risk .......
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Freddie trifecta
Freddie prints its third STACR since lockdown, while Fannie remains on sidelines
Freddie Mac yesterday priced another STACR deal, its third since lockdown conditions began in early March. Its 2020-DNA4 comprised $1.088bn of M1, M2, B1 and B2 tranches, and, like the previous two offerings there will be an associated ACIS insurance policy to transfer additional risk.
The $295m M1 tranche carries a 3% coupon with a weighted average life (WAL) of 2.13 years, .......
News 19 August 2020
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Special servicing assets transferred
Sector developments and company hires
Special servicing assets transferred
Market Moves 18 August 2020
The assignment of substantially all of the assets of C-III Asset Management to Greystone Servicing Company, pursuant to the applicable PSA associated with each of the C-III specially-serviced CMBS, is complete. The assignment includes 64 transactions rated by Moody's and 28 Moody's-rated US conduit CMBS that hold C-III specially-serviced companion loans, but excludes the non-C-III specially-serviced .......
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Suburban bounce
SFR volumes up as renters vacate cities
Single-family rental (SFR) securitisation issuance has picked up this year, despite coronavirus-related volatility. Notably, suburban developments appear to be benefiting as renters seek alternatives to the urban environment.
“The impact of the Covid-19 environment on the economy and real estate assets continues to unfold,” says Daniel Tegen, senior director at KBRA. “The resulting implications on cashflow and value .......
News Analysis 18 August 2020
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Hotels dominate special servicing transfers
Sector developments and company hires
Hotels dominate special servicing transfers
Market Moves 17 August 2020
During 1H20, 1,065 US CMBS loans totalling US$40.1bn (representing approximately 7% of total outstanding CMBS) transferred to special servicing, as CMBS borrowers continued to grapple with the economic impact of the coronavirus pandemic, according to Fitch. The vast majority of these transfers, more than 900 loans totalling US$35.5bn, occurred during 2Q20. In comparison, special servicers .......
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'Flip clause' complaint dismissed
Sector developments and company hires
‘Flip clause’ complaint dismissed
Market Moves 14 August 2020
The US Court of Appeals for the Second Circuit has ruled that investors should keep roughly US$1bn received from various Lehman Brothers affiliates after the bank’s 2008 bankruptcy filing triggered the liquidation of dozens of CDOs. The case centres on the Bankruptcy Code’s treatment of ‘flip clauses’ in a securitisation waterfall, which reprioritise cashflow upon bankruptcy and .......
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LLPA increase 'misguided'
Sector developments and company hires
LLPA increase ‘misguided’
Market Moves 13 August 2020
Fannie Mae and Freddie Mac are increasing the loan-level price adjustment (LLPA) by 50bp as an adverse market delivery charge on effectively all mortgage refinances, except for construction loans, with settlement dates after 1 September. In response to the move, the Mortgage Bankers Association states that the announcement “flies in the face of the Administration's recent executive .......
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Hertz review reversed
Sector developments and company hires
Hertz review reversed
Market Moves 12 August 2020
Moody's has changed the direction of review for 11 tranches of rental car ABS issued by Hertz Vehicle Financing II (HVF II) to under review for upgrade from under review for downgrade. The action is prompted by: the recent court-approved order requiring Hertz to make lease payments and remit required vehicle sales proceeds (SCI 31 July), .......
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Problem solving
Paul Wilden, global head of capital markets at Apex Group, answers SCI's questions
Q: How is Apex Group involved in the securitisation market?
A: We provide a combination of SPV administration, trustee and agency services to a broad cross-section of asset classes. Our capital markets business is broadly sector agnostic.Q: What are the firm’s key areas of focus today?
Provider Profile 10 August 2020
A: Given the proliferation of private debt funds, one area where we add .......
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Alternative CLO ETF announced
Sector developments and company hires
Alternative CLO ETF announced
Market Moves 7 August 2020
Alternative Access Funds (AAF) has announced the registration of its new AAF First Priority CLO Bond ETF, which is scheduled to become effective on 14 August and - if all approvals and launch objectives are met - begin trading in early September under the ticker ‘AAA’. The new ETF will focus its investments in US dollar-denominated .......
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Freddie STACRs them up
New STACR deal was upsized and printed at the tight end across the capital structure
Freddie Mac has confirmed that the B1 and B2 tranches of its $835m STACR REMIC 2020-HQA3 deal, printed at the end of the week of July 20-24, were upsized from $150m to $225m and $75m to $100m respectively.
Each tranche of the four-tranche offering, underwritten by Citi and BNP Paribas, also priced at the tight end of guidance. In addition, .......
News 4 August 2020
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MM CLO test failures rise
Sector developments and company hires
MM CLO test failures rise
Market Moves 4 August 2020
The continued deterioration in credit quality of issuers due to the coronavirus pandemic resulted in a large number of US middle market CLOs failing a variety of tests for the first time in 2Q20, according to Fitch’s latest report on the sector. Of the 58 MM CLOs covered in the report, 23 failed at least one .......
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Euro CLO equity edges ahead
Sector developments and company hires
Euro CLO equity edges ahead
Market Moves 3 August 2020
European CLO equity cashflow returns average 9.3% year-to-date and - as all CLOs in reinvestment are currently paying - the full-year 2020 cashflow return is likely to be low-teens, according to a new report from JPMorgan CLO research analysts. As such, European equity pieces have edged ahead of their US counterparts, currently returning 8% year-to-date .......
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Nuanced approach
Call for clarity in defining ESG
A nuanced approach to ESG considerations is emerging within the securitisation market. Nevertheless, the Covid-19 pandemic has put social and governance factors in the spotlight.
Anuj Babber, head of ABS research at M&G Investments, says: “The securitisation industry is at the infancy of incorporating ESG considerations into its credit and investment decisions. What we are seeing is that .......
News 3 August 2020
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CRT conveyor belt
The second CRT deal from JPM marks a quickening of pace in the bank market
JPM’s second CRT deal in the last nine months, priced two weeks ago, is expected to attain the necessary regulatory approval, while other deals and, indeed, other issuers should follow the same path, say analysts.
The Chase Mortgage Reference Notes 2020-CL1 transferred risk on a $2.002bn reference pool of 8,683 prime quality residential mortgage loans.
“I would definitely expect them to .......
News Analysis 31 July 2020
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GSE results improve
Sector developments and company hires
GSE results improve
Market Moves 31 July 2020
Both Fannie Mae and Freddie Mac have reported sharply improved Q2 results, despite the ongoing housing market dislocation as a result of Covid-19. Fannie Mae said net comprehensive income was US$2.53bn, compared to US$476m in Q1, while Freddie Mac had income of US$1.94bn compared to US$620m in Q1. Both GSEs had much lower than usual profits in .......
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AGs fight Madden rule
Sector developments and company hires
AGs fight Madden rule
Market Moves 30 July 2020
The attorneys general of California, Illinois and New York have filed a suit against the OCC’s ‘valid when made’ rule (SCI 1 June), which they claim would allow the federal government to pre-empt state usury laws and allow third-party entities “to prey on vulnerable” borrowers. The AGs note that the ability to pre-empt state usury .......
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Blockchain boost
DLT opportunity for ABS market
Coronavirus-related concerns are boosting the use of technology within the securitisation market. Blockchain is one area that is benefiting from this trend.
John Evans, Vanguard’s head of blockchain strategy, says: “One area we feel that there is a good opportunity to modernise the plumbing of the markets is in the securitisation market, and ABS is a good example .......
News Analysis 30 July 2020