Fitch's 'House View': U.S. RMBS 3.0 Pushing in the Same Direction

NEW YORK--(BUSINESS WIRE)-- Unprecedented cooperation between RMBS investors, issuers, policy makers, arrangers and other market participants is resulting in real progress towards establishing a solid framework for future private label issuance, according to Fitch Ratings during its fourth annual U.S. RMBS 'House View' forum.

'For once, investors and issuers are pushing in the same direction,' according to Global Securitization Head Kevin Duignan. 'Both sides are seeking ways to repair investors' confidence that was badly shaken in the financial crisis.' While progress may be slower than market participants had hoped, panelists at the event were optimistic that significant enhancements will begin to appear as early as this year.

One development that may change sentiment, according to keynote speaker Dr. Michael Stegman, Counselor to the Secretary for Housing Finance Policy, is the role of a 'Deal Agent' or 'Transaction Manager' that would give investors greater confidence that their interests were being represented and protected. This would in turn boost the U.S. Treasury's efforts to, as Dr. Stegman said, 'catalyze the development of a vibrant, responsible private label MBS channel'. In addition, Dr. Stegman highlighted Fitch's efforts to improve transparency in the private label RMBS market through its work on the Credit Rating Agency Exercise.

Dr. Stegman's full speech is available by clicking below:

http://www.treasury.gov/press-center/press-releases/Pages/jl10034.aspx

Despite the substantial headwinds that the sector has endured, strides have been made with regard to RMBS 3.0, as discussed by a panel of industry experts led by U.S. RMBS head Grant Bailey. Among them is progress towards implementing the concept of the aforementioned 'Transaction Manager' described by Dr. Stegman, which the panel generally felt was the most significant remaining reform in the sector. Other potential improvements gaining momentum through industry working groups include the increased standardization of Representations and Warranties, which would allow investors to easily identify variances from market benchmarks.

Also among the positives has been the slow but increasingly steady growth of alternative asset classes outside the core prime jumbo space, as per a panel led by Suzanne Mistretta, head of Fitch's U.S. RMBS new deal rating team. The subset likely to see the most growth in the foreseeable future is re-performing and non-performing loan securitizations given the plentiful supply of collateral expected from banks, the GSEs, and HUD. While non-qualified mortgage (QM) products have been gaining a lot of attention lately, products outside prime-quality interest-only loans and higher debt-to-income ratios has yet to gain any traction as meaningful origination levels for future securitizations remains a challenge.

Additional information is available at 'www.fitchratings.com'.

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Fitch Ratings
Grant Bailey
Managing Director
+1 212-908-0544
Fitch Ratings, Inc. 33 Whitehall Street New York, NY 10004
or
Suzanne Mistretta
Senior Director
+1 212-908-0639
or
Kevin Duignan
Managing Director
+1 212-908-0630
or
Media Relations:
Sandro Scenga, +1-212-908-0278
[email protected]

Source: Fitch Ratings

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