Complete news archive
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A touch of seasoning
Proposed expansion of pool of qualified mortgages offers little for MBS
While the new category of qualified mortgage (QM) proposed by the Consumer Financial Protection Bureau (CFPB) might in theory increase the supply of high quality US mortgages for securitization, the stipulations of the proposed new rules mean that in fact there is unlikely to be a rich new gravy train, stress mortgage analysts.
The CFPB intends to broaden the net of QMs by .......
News 27 August 2020
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Doctrines disputed
MPL principles continue to be challenged
The ‘true lender’ and ‘valid when made’ doctrines of the marketplace lending industry continue to be disputed. While the state of Colorado last week reached a landmark settlement with online lenders Avant and Marlette, seven other states are challenging the FDIC and the OCC’s rulemaking in connection with these principles.
Henry Morriello, partner, head of structured finance and .......
News Analysis 27 August 2020
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Impairment posted
Write-down for Arrow, but collections improve
Arrow Global posted a £110.4m loss in 1H20 and a non-cash impairment equal to £133.6m, following a revaluation of its balance sheet after the Coronavirus crisis. However, non-performing loan collections have registered a positive trend since April as courts and real estate markets reopen. Indeed, Arrow is expected to return to profitability in 2H20.
The macroeconomic impact of .......
News 26 August 2020
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Middle ground?
Middle market CLO credit agreements being renegotiated
Many of the borrowers of the loans underlying US middle market CLOs are facing severe economic distress because of the Covid crisis and recessionary fears. As a result, they are renegotiating and amending their credit agreements to avoid breaching their financial maintenance covenants, which has given lenders an opportunity to improve terms from their perspective as well.
“Many .......
News 26 August 2020
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View from an investor
SCI hears from an US MBS buyer about what he likes in the market... and next week what he doesn't
Karlis R. Ulmanis, CFA, is a portfolio manager at DuPont Capital. In these waning days of summer, he gave an hour of his time last week to sit down (virtually, of course…) with SCI to discuss where he sees value in the current somewhat fractured and definitely jittery MBS market, agency and non-agency. We publish the first half of .......
Talking Point 25 August 2020
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FDIC sued over Madden rule
Sector developments and company hires
FDIC sued over Madden rule
Market Moves 25 August 2020
The states of California, Illinois, Massachusetts, Minnesota, New Jersey, New York, North Carolina and the District of Columbia last week filed a lawsuit in the US District Court for the Northern District of California against the FDIC over its final rule clarifying that when state-chartered banks sell, assign or transfer a loan, an interest rate that .......
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Skilled nursing CMBS eyed
Sector developments and company hires
Skilled nursing CMBS eyed
Market Moves 24 August 2020
DBRS Morningstar is reviewing its ratings on the CSMC 2019-SKLZ, Greystone CRE 2018-HC1 and CHC 2019-CHC CMBS, which are secured primarily by skilled nursing facilities. The agency warns that in the coming months, nursing homes and their parent companies may face significant legal liability as a result of the high death toll at nursing homes during .......
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SCI Start the Week - 24 August
A review of securitisation activity over the past seven days
Last week's stories
News 24 August 2020
Car capital relief
JPM Chase tests the auto loan waters with new CRT deal
Freddie, Fannie fight back
The GSEs have come out swinging after widespread denunciation of the LLPA
Freddie trifecta
Freddie prints its third STACR since lockdown, while Fannie remains on sidelines
Lack of transparency
Reporting discrepancies cause confusion
Maximum impact
Full deduction SRTs stage comeback
Mixed outlook
Divergent default .......
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Car capital relief
JPM Chase tests the auto loan waters with new CRT deal
Investors and analysts have given a cautious welcome to the latest JP Morgan CRT deal - a $1.8bn auto loan securitization, which also marks the bank’s return to the auto loan sector market after an absence of 14 years.
The deal is being marketed at the moment. The loan pool consists of a prime retail auto loan portfolio consisting of 82,824 reference .......
News 21 August 2020
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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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Risk transfer round-up - 20 August
CRT sector developments and deal news
Banca Carige is rumoured to be readying a capital relief trade referencing corporate loans for 2H20. The transaction would be the Italian lender’s first significant risk transfer deal (see SCI’s capital relief trades database).
....... News 20 August 2020
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Mixed outlook
Divergent default performance highlighted
Second quarter corporate default data reveals a cluster of defaults around retail, services and the automotive sector as post-Covid negative outlooks for all three persist. However, the default landscape between the three segments shows some marked differences, with retail being hit the hardest.
According to Euler Hermes data, corporate defaults were clustered in the retail, services and .......
News 20 August 2020
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New targets
US CLO spread and issuance targets raised as previous levels already met
US CLO triple-A and triple-B secondary spreads are now at 150bp and 450bp, while net primary supply passed US$27bn this week. As a result, post-Covid crisis targets for the entirety of 2020 set by JPMorgan CLO research analysts have already been met or exceeded and have consequently been revised upwards.
“It seemed almost inconceivable spreads would tighten so .......
News 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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Maximum impact
Full deduction SRTs stage comeback
Supranational and private capital relief trade structures have had to be adjusted following the coronavirus fallout to address the impact of payment holidays on deal performance, according to SCI’s latest CRT Case Study. Both supranational and private investors have treated the issue with equal caution. However, full deduction significant risk transfer deals originated by standardised banks and solely backed .......
News Analysis 17 August 2020