Senior Managing Director Laurie Goodman at Amherst Securities Group noted that she expected new origination for private-label securitization to reach roughly $30 billion for the year.
Goodman sat on a panel at the American Securitization Forum conference discussing the topic Federal Housing Finance Agency securitization platform and the potential for government-sponsored enterprise risk-sharing.
A lot more PLS production will occur in 2013 compared to 2012 due to securitization now economic, at least in limited size for pristine collateral, Amherst would expect more securitizations with origination done primarily by non-bank originators, with real estate investment trusts holding the interest only bonds and subordinate bonds.
Goodman noted that she does not expect bank originators to make a comback for three reasons.
Whole sale loans on balance sheet receive more favorable capital treatment than holding mortgage-backed securities. Also, banks are awash with deposits; with limited loan demand mortgages are a very attractive asset. Finally, regulatory uncertainty with the Consumer Finance Protection Bureau finalization of rules.
When looking at residential mortgage-backed securitizaton 2.0 versus RMBS 1.0 there’s a focus on improvements including “high quality mortgage products, improved process, representation and warranties, improved capital structure.”
However, there are still many factors that need to be addressed in the PLS securitization market including spelling out what constitutes a rep and warrant violation, the need for a collateral manager, conflicts on interest when the service owns pieces of the foreclosure process, second liens, adverse selection of loans for securitization versus loans for portfolio on the part of large banks.
In regards to the agency counterpart, a new rep and warrant framework also needs to be addressed.