IFR-MF Global subprime RMBS liquidation is scuttled

Tue Nov 1, 2011 4:08pm EDT

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by Adam Tempkin

NEW YORK, Nov 1 (IFR) - Repo counterparties of MF Global attempted a small liquidation of some of the embattled company's non-agency residential mortgage-backed securities (RMBS) yesterday that was subsequently canceled, according to market sources.

The counterparties seized the mortgage bonds and tried to liquidate them, but the company's bankruptcy proceedings put a stop to the action.

Two market participants said that the bid list may just be postponed.

The list of prime and Alt-A non-agency mortgage bonds backed by fixed-rate 30-year collateral had an original face value of approximately US$877m, though the current face value was much less, closer to US$400m.

The list included several large so-called interest only (IO) mortgage bonds, which accounts for the larger dollar value of the original issuance. The notional value of IO strips is typically much larger than their actual value.

The bid-wanted-in-competition (BWIC) list, which comprised 41 bonds, was all set to bid at 11:30am yesterday, but was scuttled.

The majority of the list comprised subprime and home equity RMBS from 2005 - 2007. The largest bond on the list, an IO strip from American Home Mortgage's AHMA 2006-1 transaction, had an original face value of US$173.675m.

Other names on the list included severely downgraded home equity bonds from Bear Stearns, Countrywide, and Citigroup Mortgage Loan Trust, among many others.

Secondary securitized-product flows have been much lighter this week. There has only been US$96.8m in prime and Alt-A RMBS traded in the secondary market today, according to Empirasign Strategies, a capital markets data provider.

There has been US$109.7m ABS offered on bid lists today, which includes legacy subprime, home equity, and HELOC mortgage bonds, Empirasign said.

(Reporting by IFR structured finance analyst Adam Tempkin)

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