Conspicuously absent from all the chatter around blockchain’s potential place in structured finance has been much discussion around the thorny matter of consensus. Consensus is at the heart of all distributed ledger networks and is what enables them to function without a trusted central authority. Consensus algorithms are designed to prevent fraud and error. With large,…
Since 2015, a new tier of the private-label residential mortgage-backed securities (PLS) market has emerged, with securities collateralized by non-qualified mortgage (non-QM) loans. These securities enable mortgage lenders to serve borrowers with non-traditional credit profiles. The financial crisis ushered in a sharp reduction in mortgage credit available to certain groups of borrowers. Funding sources, such…
Weaknesses in securitization processes for mortgage loans contributed to the financial crisis of 2007 – 2008 and have led to a decade-long stagnation in the private-label residential mortgage-backed securities (PLS) market.
Although market participants have attempted to improve known weaknesses, lack of demand for private-label RMBS reflects investors’ reluctance to re-enter the market and the need for continued improvements to securitization processes to re-establish market activity. While significant issues still need to be addressed, promising advances have been made in the PLS market that improve information provided to investors as well as checks and balances designed to boost transaction performance.
Since the financial crisis began in 2007, the “Non-Agency” MBS market, i.e., securities neither issued nor guaranteed by Fannie Mae, Freddie Mac, or Ginnie Mae, has been sporadic and has not rebounded from pre-crisis levels. In recent months, however, activity by large financial institutions, such as AIG and Wells Fargo, has indicated a return to the issuance of Non-Agency MBS. What is contributing to the current state of the securitization market for high-quality mortgage loans? Does the recent, limited-scale return to issuance by these institutions signal an increase in private securitization activity in this sector of the securitization market? If so, what is sparking this renewed interest?
The single family rental market has existed for decades as a thriving part of the U.S. housing market. Investment in single family homes for rental purposes has provided many opportunities for the American “mom and pop” investors to build and maintain wealth, prepare for retirement, and hold residual cash flow producing assets. According to the National Rental Home Council (NRHC) (“Single-Family Rental Primer”; Green Street Advisors, June 6, 2016) as of year-end 2015, the single family rental market comprised approximately 13% (16 million detached single-family rentals) of all occupied housing and roughly 37% of the entire United States rental market.
On September 15, 2015 the Federal Housing Finance Agency released an update on the Common Securitization Platform (CSP). The report can be found at FHFA’s Common Securitization Platform website. Some of the highlights of the FHFA update are:
Common Securitization Solutions, LLC (CSS) was established in October 2013 as an independent, jointly-owned business entity by Fannie Mae and Freddie Mac. (pg. 6)
From 2012 through mid-2015, the Enterprises had invested $146 million in CSS (pg. 2)
In July 2015, CSS, Freddie Mac and Fannie Mae convened a Single Security/CSP Industry Advisory Group (pg. 19)
All CSS employees are currently employees of either Fannie Mae or Freddie Mac. CSS plans to convert its associates to CSS employees in the first half of 2016 (pg.2)
The Securities and Exchange Commission (SEC) has had a busy year adopting new rules for asset backed securities (ABS) with significant emphasis on mortgage and auto deals. Originators, aggregators and issuers of RMBS are dealing with an abundance of regulatory change. On the heels of ATR/QM, the industry has been levied with QRM/risk retention rules,pre-securitization due diligence reporting, and rigorous disclosure requirements under Regulation AB.
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