Jan 08 - Final clarity as to what constitutes a qualified
mortgage and the likelihood of increased issuance will be key developments that
will shape the coming year for U.S. RMBS, according to Fitch Ratings in its
expanded outlook report for the sector.
The Consumer Finance Protection Bureau's (CFPB) intent to release final
definition for qualified mortgages (QM) will be a key milestone for the market.
The final ruling on QM will provide some clarity to the definition of a QRM as
proposed under Dodd-Frank, as the latter cannot be any broader.
'Securitization of QRMs exempts issuers from risk retention and premium capture
requirements so resolving these definitions will be a critical breakthrough for
restarting the private-label RMBS market,' said Senior Director Suzanne
Mistretta. 'Finalization will, at a minimum, provide clarity to the market and
allow institutions, particularly banks, to assess the costs of re-entering the
While new issue activity is already on tap to rise in 2013, Fitch says that the
volume will pale in comparison to historical levels. Nonetheless, investor
demand is strong thanks largely to solid performance of RMBS 2.0 transactions
and historically low yields.
Several key announcements by the Federal Housing Finance Agency this year are
supportive of a housing and mortgage market recovery. They include the
announcement of the streamlined short sale process and rep and warranty
These developments come as the mortgage markets continue their slow recovery.
There still remains disparity, however, among many metropolitan statistical
areas (MSAs). For instance, markets Detroit, Phoenix, and Atlanta are
stabilizing, with some even beginning to turn around. Conversely, key states
such as New York and New Jersey are still struggling with a backlog of
distressed inventory and long liquidation timelines.
That said, 'Inventory is declining and distressed liquidations have sharply
dropped while mortgage delinquencies are improving for most sectors,' said
Additional information is available in Fitch's 'U.S. RMBS 2013 Outlook' report,
available at 'www.fitchratings.com' or by clicking on the link at the top of the
Link to Fitch Ratings' Report: U.S. RMBS 2013 Outlook