The FDIC is Up to Something in the Market
The lack of confidence in the U.S. securitization market may be further compounded by the mix messages the Federal Deposit of Insurance Corporation (FDIC) has sent out to the industry in February and March. On the one hand you have FDIC’s commitment to help kick start the securitization, supported by reports that it is working on a plan to package around $40 billion of failed bank assets into securities that some believe will restart the stalled securitization markets. On the other the FDIC has lined up its safe harbor proposal, which passed with its current language could call time on the private label securitization market. The conundrum deepens, considering that as of press time, the FDIC continued to have a gag order placed on its plans to securitize those bank assets. In fact, one source working for the underwriter confirmed to HousingWire, that the FDIC is so dead-set against releasing any information prior to issuance that it may go so far as to pull contracted work if information is leaked. Requests to release the info were dismissed outright, as was the argument that taxpayers have a right to now where their money is being directed at a federal level. "Nonetheless, we must protect the needs and wants of our client [the FDIC]," the source said. Putting the whispers to one side, available assets on the government balance sheet continue to grow. By the end of February, The FDIC said that regulators had closed an additional four banks: the George Washington Savings Bank in Illinois, La Jolla Bank in California, La Coste National Bank in Texas and Marco Community Bank of Marco Island, Florida. This brings the Tally so far for 2010 to 20 banks. Last year saw 140 banks fail and FDIC has a said it expects 2010 to peak 2009 failures. The FDIC is now considering its option to maximize the value of assets in receivership and one of those options is securitizing some pool or pools of loans. “Washington is emerging as the new Wall St and in the short term it’s here where we are going to see the steps taken to revive confidence in the securitization mark, “ said another market source. “In general, we need to see a restoration of confidence and trust before we can see any lasting revival in the financial markets.” What better testimony that the Government believes the market is on its way to being fixed than to have the first of the big ticket label deal come straight from Washington? Tim Ryan, President and CEO of SIFMA said that the FDIC’s move to package and sell loans through securitization would provide a model for future private market issuances and could help kick-start nonconforming loan securitizations and secondary markets, tighten pricing for securities and strengthen the interests of real money investors. The FDIC looks set to move up its securitization program, which was originally expected to come sometime during 2Q. According to a Bloomberg report, the FDIC could start selling bonds tied to the assets of failed banks in March. Initial offerings included about $2 billion of the FDIC’s remaining stakes in loans from Corus Bank and Franklin Bank. The FDIC is insuring the senior-ranked securities but is unlikely to sell or guarantee the junior securities, according to the report. The FDIC may also offer a re-securitization of about $2 billion of mortgage bonds without government-backed guarantees. According to investor reports that began circulating at the end of February, the FDIC's program is offering $668 million of SSGN 2010-L2 RMBS backed by performing and non-performing loans and REO seized from Franklin Bank in a single-tranche fixed-rate offering due September 2019. This offering includes a USD 668m I/O class that is not being offered. Residential Credit Solutions has a 50 percent equity interest and is acting as servicer. TO READ THE FULL STORY, SUBSCRIBE NOW.