Author Archive

Securitization market in China 2015: 500m

The fists experiments with securitization in China started in 2004 under close supervision by Chinese Securities Regulatory Commission (CSRC) and stopped after the 2008 subprime crisis panic. The ABS market restarted in 2012 and quickly grew in 2014. Initially, the CSRC reviewed and approved every new transaction. Starting from 2015 the ABS must to be registered with the CBRC (without approval), potentially leading to the golden decade for ABS in China. Moody’s assumes the total ABS outstanding of 500 billion in 2015. In Europe, the ABS market is four times more in size. SOURCE:  Battling with “Lemon Problem”: Investors Protection In Chinese ABS Market SOURCE: SIFMA Europe Structured Finance Issuance and [&hellip

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Weak Ruble makes the Russian CRE Warehouses attractive for international investors

There are always attractive investments in the crisis. Especially because of the RUB depreciations, the Warehouse Real Estate objects in Russia becoming more appealing. Latest example Adidas bought 120 thousand m2 surfaces instead of renting them in «PNK Chehov-2». In Nutshell the 2015 trends in Moscow warehouses • Total NEW supply 800t m2, higher than in 2014. • Increasing demand from tenants: food retailers, production, and logistic companies (the most problematic sectors in 2009) • The average rental rates in A class in RUB 4.3t or $60 per m2. • The new contacts in new VACANT warehouses are in

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NPL sales up in 2015

PwC expects a flood of new NPL European real estate sales to be launched after the summer holiday period, >50% higher than €91bn in European REF sales in 2014. • The drivers: last year’s Asset Quality Review by the ECB; private equity investor demand; banks to conclude their restructuring of around €2trn of unwanted loans. • NPL sales are closed mainly in UK (€60bn per now), followed by Germany, Spain, Italy (€20-25bn for each country. • Investors expect the deals in Italy, the CEE within of next 12-18 months

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CMBS not affected by default (of Puerto Rico)

An interesting example that even in case of state default, the CMBS transactions can keep the rating. • According to Moody’s, Puerto Rican CMBS backed by hotel / retail collateral will perform in line with expectations, despite state debt default. • The hotel / retail market depends rather on tourism than local spending. • Moody’s rates only the senior tranches having strong credit support

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EC implements low capital charges for high-quality securitizations end of September.

According to the undisclosed memo, the European Commission may react to the advice provided by the European Banking Authority to soften the capital charges for high-quality securitization end of September. (1) EC may implement the rules for identifying “simple, transparent and standardized” (STS) securitizations that qualify for lower capital requirements. (2) Short-term (below one year) ABCP could be eligible. (3) Further softening of capital charges for insurances is expected. (4) No “ex-ante” certification of STS securities by supervisors. Rather, the originator will handle meeting the requirements if it labels the paper that way. (5) Synthetic securitizations are still not eligible for the high-quality label

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Freddie Mac constructs the hybrids out of true sell and synthetic securitizations

Freddie Mac continuous to construct the hybrids out of true sell and synthetic securitizations to outsource the risk away from the taxpayers. The new deal called “Small Balance” Loan Securitization. The 120m portfolio consists of 44 multifamily mortgage-backed loans, with the 4,9% concentration. The weighted interest rate is 3.5%; the tenor is 17 years; the DSCR 1.41; LTV 69.7% The structure is true-sell where both the 10% equity (B Certificate) and 90% senior tranche (SB certificate FRESB 2015-SB1) sold to investors. The senior tranche has a coupon of [2.55%] and is guaranteed by Freddie Mac at Guarantee Fee Rate of 0.25%. The equity tranche earns the remaining interest minus particular [&hellip

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Moody’s publishes methodology for rating Polish RMBS

In January 2015, Moody’s updated the residential mortgage collateral analysis model (MILAN). The calibration inputs for Poland, benchmarking the Polish residential real-estate market to other jurisdictions, was published on 11. August. Here are some of the Moody’s underlying assumptions for Poland: Foreclosure costs (variable): 10,0% Time to foreclosure: 36 months

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True sell securitization may disappear in Norway after 2016?

On 10 April 2015 the Norwegian legislator eliminated the rules on the securitization of loan portfolios out of a new act on financial undertakings (the FUA). Starting from 1 January 2016, the SPVs in true sell securitization would be subject to all the requirements applicable to finance institutions in general, such as license, supervision, capital and reporting requirements

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ABS boost depends on insurances and banks

Another statement that the ABS market depends on capital charges for insurance companies and the banks. Also interesting that the ECB proposals are focused on Dutch and British RMBS. Who cares about other countries? (1) Insurance companies buy one-third of the ABS new issuances, the banks buy the half. (2) New issuance in 2014 was €216bn compared to €819bn in 2008. The total ABS outstanding was €528bn. (3) The ABS market decreases because of the cheap ECB money and the weak new emission. (4) The loop: a) the Investors require sufficient spreads covering the high internal capital costs of ABS investments. b) The banks can not effort

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How to change the loss methodology?

How to change the loss methodology? (1) A CMBS deal with 240 mortgages. Unfortunately, the author does not remember the deal name and the banker. (2) Each mortgage is sliced into a 100 slices. (3) One slice from each of the 240 mortgages is mixed into a “bundled” asset, creating 100 bundled assets. (4) All 100 bundled assets are placed into a singled CMBS deal for tranching

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