In House Drama


While the securitization industry has faced countless adversaries over the past several years, much of the drama last month came from within.

Early in March, simmering tensions at the American Securitization Forum (ASF) finally hit the boiling point, with a number of board members resigning in a dispute over management with executive director Tom Deutsch. In a quick overview of what happened, Felipe Ossa hones in on the Structured Finance Industry Group (SFIG), a new trade group that sprung up mid-month — formed by defecting ASF members — and whether it will be able to avoid the tensions that dogged the ASF.

But there are other frictions within the ABS family as well. A private label mortgage-backed from JP Morgan has elicited an unsolicited diss from Moody’s Investors Service. In Ossa’s market wrap, he explains how a conversation among rating agencies about weak representations & warranties in proposed RMBS now has a concrete focus.

Elsewhere in the mortgage market, John Hintze examines the ongoing beef that RMBS investors have with the mortgage modification plan’s putting second-lien mortgage ahead of first liens, while an American Banker story investigates the significance of the looming single platform planned by the GSEs.

But conflicts haven’t stopped deals from flowing.

In this month’s cover story, Nora Colomer sees plenty of activity ahead for a small asset class: servicer advances. Securitization in this area is bound to keep growing as banks farm out servicing to firms that depend on capital markets as they don’t have depositors or other easy access to funds.

Nora also explores another area of promise: timeshare ABS. Operators of these properties are turning more and more to securitization to finance loans.

Karen Sibayan, meanwhile, shows in her story that the FDIC’s new rules on deposit insurance — which take effect this month — could up the appeal of riskier CLO tranches for banks.

Finally, Ossa delves into a methodology change from Moody’s that’s designed to more fully incorporate sovereign risk into structured finance deals. The results for some peripheral European ABS aren’t going to be pretty.