Asset Securitization Report Columns
August 2010--The Impact of Dodd-Frank on the Non-Agency MBS Markets
The Dodd-Frank financial reform act signed this month by President Obama was, in my reading, very unfriendly to the non-agency MBS market. Taken in its entirety, key provisions of the bill create significant and protracted uncertainty for issuers and investors, further delaying the much-anticipated revival of private-label MBS issuance.
July 2010--Home Prices and Mortgage Performance
While it isn’t news that home prices impact the prepayment and credit performance of mortgage loans, it is nonetheless useful to review some of the lessons of the past few years. One is that the performance of all mortgage products is linked to stable home prices.
June 2010--The Failure of Market Forces in the Non-Agency MBS Market
A candid assessment of the causes of the crisis and the future of securitized lending forces us to address why the “market forces” that had protected investors in prior years failed to prevent the market from being flooded with flawed securities. It is imperative that we understand and identify market functions, determine why they broke down and devise both market- and regulation- based remedies.
May 2010--Borrower Equity and Defaults--The Harsh Reality
A number of recent studies have documented the correlation between negative home equity and the incidence of defaults. A report by CoreLogic released in February stated that when negative equity exceeds either 25% of a loan’s balance or $70,000, “homeowners begin to default with the same propensity as investors.” While the linkage between the two factors is fairly clear, the full nature of the relationship between homeowner equity and credit performance is quite complex.
April 2010--The Senate Financial Reform Bill and the ABS Markets
The financial reform bill misses an opportunity to truly improve the securitization process by strengthening and codifying the representations and warranties associated with ABS deals. Stronger and more enforceable reps and warranties would have a much greater impact on securitization quality than forced risk retention.