NEW YORK, April 15 (IFR) - A new report from Moody's says
several provisions in the comprehensive housing finance reform
bill proposed by US Senators Tim Johnson and Mike Crapo would
help spur issuance in private-label RMBS.
Under the framework, fewer residential mortgage loans would
be eligible for inclusion in government-guaranteed securities
because of changes in criteria establishing which
securitizations can receive government guarantees.
That has spurred hope in some circles that private label
RMBS might eventually reach US$100bn-US$200bn a year, a mortgage
analyst said. "It's the right step needed."
Non-agency RMBS was just under USD20bn last year - a far cry
from the USD1tn at the market's 2006 peak. Year-to-date, volumes
are just USD3.7bn, according to Thomson Reuters data.
But the Johnson-Crapo bill is unlikely to pass this year,
owing to a divided Congress and the mid-term elections,
according to the analyst, an investor and the Moody's report.
"Under the bill, a new agency, the Federal Mortgage
Insurance Corporation (FMIC) would provide a government backstop
for eligible mortgage pools that have secured a private first
loss piece of 10% through FMIC-approved risk-sharing
mechanisms," says Moody's analyst Sang Shin. "Loans would only
be eligible for the FMIC backstop if they meet the CFPB's
Qualified Mortgage (QM) standards, among other requirements."
The new requirements would be more stringent than the GSEs'
current eligibility criteria, which do not mandate that loans
meet all QM standards to be eligible for securitization.
Sang also said greater transparency and standardization, as
well as the emergence of new issuers or aggregators to the
market, was also needed to buoy confidence among investors.
Although issuers would use the platform to bring
FMIC-guaranteed deals to market, Moody's says the platform would
also be available for private label RMBS.
NEXT STEP: HIGH-LEVERAGE LTV LOANS?
Still, hurdles remain, including political infighting over
the US real estate finance market and the not-quite-ripe
economics of private RMBS issuance, the investor said.
The potential for disruption in secondary market liquidity
could also hold down new origination activity, according to
"The conforming loan provision is a shift from the Obama
administration's stance and previous housing reform proposals
such as the bill introduced last year by Senators Corker and
Warner," said Sang of Moody's.
"Maintaining the existing maximum conforming loan balance
would limit the potential increase in private-label RMBS
Meanwhile, Freddie Mac's STACR and Fannie Mae's CAS risk
sharing programs have already gained a foothold among private
RMBS buyers, the analyst said. Some investors in the maiden
risk-sharing deals have enjoyed a largely stable 100bps lift
from initial pricing levels, he said.
To that end, the GSEs are looking to expand their
risk-sharing platforms to include bundles of high-leverage LTV
loans, both the investor and analyst said.
If successful, that could mark a new post-crash milestone
for the RMBS market, namely the pricing of highly leveraged
residential loans in the credit markets, he said. The first
credit-sharing deal to include this type of collateral could
emerge as soon as the third-quarter, he said.
Calls to Freddie and Fannie were not immediately returned.
STRUCTURED FINANCE PRIMARY ISSUANCE: 4-15-14
WOART 2014-A: World Omni priced its first prime auto deal
since last October; the US$849.15m World Omni Auto Receivables
Trust 2014-A. Barclays (structuring), JPMorgan and Wells Fargo
were the joint leads. The 1.14/2.55/3.81-year Triple As printed
at EDSF plus 16bp, interpolated swaps plus 20bp and interpolated
swaps plus 26bp. Guidance was shown at 18bp-20bp, 22bp-24bp and
ACAR 2014-2: American Credit Acceptance priced its second
subprime auto offering of the year; the US$259.17m 144A/REG S
American Credit Acceptance Auto(ACAR) 2014-2. S&P was the sole
ratings agency on the trade. The top tranche was rated Double A
and had a tenor of 0.84-years. Pricing was in line with talk at
EDSF plus 75bp. Deutsche Bank (structuring) and Wells Fargo were
KCOT 2014-1: JPMorgan was sole lead on the inaugural US$300m
144A/REG S Kubota Credit Owner Trust 2014-1. The structure
consisted of Triple A rated notes (MDY/FIT) with average lives
of 1.44, 2.76, and 3.81-years, respectively. Price guidance was
seen at EDSF plus 28bp-30bp, interpolated swaps plus 35bp-37bp
and interpolated swaps plus 43bp-45bp. Pricing levels tightened
to 25bp, 33bp and 40bp.
MMCA 2014-A: Barclays is sole lead on the US$215.1m
Mitsubishi prime auto loan, MMCA Auto Owner Trust (MMCA) 2014-A.
The capital structure includes 1.08- and 2.55-year Triple A
notes that are being talked at EDSF plus 35 area and
interpolated swaps plus 45bp-50bp. 3.48-year Double A and Single
A slices are also being offered and are currently being shown at
interpolated swaps plus 75 area and 110 area.
AFIN 2014-2: Ally Financial is in the market with its second
non-prime auto loan transaction of 2014; the US$750m Ally
Financial 2014-2. The Triple A slices offer weighted average
lives of 1.29-, 1.86-, 2.58- and 3.23-years, respectively. Price
guidance has been released at one-month Libor plus 30 area, EDSF
plus 45 area, interpolated swaps plus 50bp-52bp and interpolated
swaps plus 58bp-60bp. Deutsche Bank (structuring), Bank of
America and JPMorgan are the joint leads.
SDART 2014-2: Santander released price guidance on its
second subprime deal of the year; the US$1bn Santander Drive
Auto (SDART) 2014-2.The 0.95-year Triple A classes will be
offered as both fixed- and floating-rate, with guidance being
shown at EDSF plus 32bp-34bp and one-month Libor plus 33bp-35bp.
All tranches are public except for the 144A class E note, which
is being retained by the issuer. The most subordinated offered
slice is the 3.95-year Triple B, which is being talked at
interpolated swaps plus 140bp-145bp. Deutsche Bank (structuring)
and Citigroup are the joint leads.
(Reporting by Charles Williams and Joy Wiltermuth; Editing by