LAS VEGAS, Jan 24 (IFR) -
As Tom Petty wrote in one of his many popular songs, “The waiting is the hardest part.”
Waiting is exactly what the market will have to do before private-label non-agency RMBS can once again become fully functional, according to panelists at the “RMBS RESTART” panel at ASF 2012 at the Aria in Las Vegas. The panel was designed to look at the prospects for and impediments to the next iteration of RMBS transactions.
From a legal perspective, John Arnholz, partner at Bingham McCutchen, believes the RMBS market is in the final stages of re-regulation. He referred to risk retention as the “grand daddy” of regulation, which is still taking shape at the present time. Dodd/Frank, as well as GSE reform, are other issues to be watched, he said.
From an economic point of view, only plain vanilla loans, whose performance is easy to predict, will come to market in the near term. “The economics of the execution of the market” must be right for a full recovery, according to Peter Sack, Managing Director (MD) at Credit Suisse. At this time rating agency models, as well as updated loan level analysis, have not yet been completed, leaving risk unclear for marginal loans, he added.
Pamela Westmoreland of GE Asset Management was the sole investor on the panel. She said investor confidence in the market is broad-ranging. Some investors need a lot of reassurance while others are more focused on strictly risk versus return.
As with Arnholz and Sack, the investor base also has to deal with regulatory issues. Westmoreland acknowledged that the mechanics of the deal must be clearly labeled in the documents and all parties involved with the transaction need to know who is taking what steps on behalf of whom.
Patrick Greene, a MD at RiskSpan, Inc., is a proud supporter of ASF’s “Project Restart,” which in addition to the main goal of reigniting issuance, aims to solve the issue of how data is perceived and found among participants.
Deal data means different things to different people and on top of that, finding the loan-level data on the SEC website is almost impossible. The latest RMBS transaction, Redwood Trust's Sequoia deal, which priced last week, began taking the incremental steps needed to address these issues. Only three or four deals are likely to tap the market in 2012.
While open dialogue amongst the market is generally healthy, the unsolicited comments that can be offered from a rating agency not involved in a transaction could lead to anger from several parties and delay deal pricing. Investors who committed to the deal are likely to hesitate before final orders are placed, panelists said.
The cost of doing deals will be higher than the peak issuance years of 2005-2006 and one of the key reasons is because of the infrastructure involved in creating a proper platform. Deal papers must also address repurchase issues and new proposed regulation may make private deals subject to the same procedures as public offerings.
Westmoreland believes that problems of future RMBS transactions will not be the loose, freewheeling underwriting of 2005-2006, but something else that is yet to be known.
charles.williams@thomsonreuters.com
No comments:
Post a Comment