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Cash-flush investors still cautious about RMBS

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Despite plenty of cash on hand, investors remain tepid about the secondary residential mortgage market, according to a panel of experts at the Mortgage Bankers Association conference in New York. Fred Matera, head of residential investments for Redwood Trust Inc. (RWT) said the Federal Reserve's ability to auction off mortgage-backed securities that once belonged to American International Group (AIG) is a positive sign. "It speaks to the fact that there are tremendous pools of capital out there," he said. "We are optimistic there will be a pretty robust private-sector mortgage backed-securities market over time." To get investors back into the private-label residential mortgage backed securitization market, Matera said issuers need to provide transparency on well underwritten mortgages, A key objective, they say, is an alignment of interests between sponsors and investors, and objective measures that can be used to determine servicer performance. The non-agency RMBS market is struggling to revive. However, investments in the commercial mortgage backed securitization market is seeing an uptick in trading, according to Barclays Capital. But growth in the secondary market also requires more certainty about the fate of agencies Fannie Mae and Freddie Mac and the housing market as a whole. Those goals, however, remain somewhat elusive as regulators continue ironing out wrinkles in their proposed reforms, panelists said. It could take five years before proposed reforms go into effect and even that timeline is uncertain, said Laurie Goodman, senior managing director of Amherst Holdings. Goodman said the time frame for GSE reform "is going to be stretched out if it happens at all." And since the Treasury Department didn't release an actual reform proposal, but rather a series of options, it's unlikely actual legislation will be developed this year or next, Goodman said. "So the earliest you will get legislation is 2013 and you usually don't get legislation during the first year of an administration, so the earliest then might be 2014," she explained. After that, Goodman said it would take another two years to implement the reforms. Write to Kerri Panchuk.

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