Read the latest articles and press releases about securitization and structured finance.

Industry News

Decline in American’s Economic Well-Being in 2022, According to Fed Report

On May 22, the Federal Reserve released its Economic Well-Being of U.S. Households in 2022. The report, revealed a decline in people’s financial well-being over the past year, to its lowest level since 2016. Out of over 11,000 respondents, 73% reported feeling “at least okay” financially in 2022, marking a 5% decline from 2021, while the percentage of adults who said they were “worse off” financially than the year before rose to 35% -- the highest level since 2014. The article notes that inflation, alongside rising interest rates, could be to blame for decreased economic security in survey respondents.

Industry News

New Headwinds for Regional Banks—Term SOFR Spreads Price-In Counterparty Risk

U.S. regional banks, already under pressure from recent rate hikes, are watching the cost of hedging their loan books increase significantly. As LIBOR’s cessation date of June 30 approaches, and more regional banks move their loans to Term SOFR, dealers are quoting bid/offer spreads as wide as 10 basis points, up from less than 1bp.

Industry News

Debt Ceiling Resolution Could Bring Further Challenges for U.S. Banks

While a resolution to the debt ceiling gridlock would allow the U.S. Treasury to raise funds to meet its financial obligations, it could increase competition for bank deposits. Banks have been under pressure due to increased interest rates and an outflow of deposits to money-market funds.

Industry News

HFSC Hearing with FHFA Director Sandra Thompson

On May 23, the House Financial Services Committee (HFSC) held a well-attended hearing titled "Protecting Homeowners and Taxpayers with FHFA Director Sandra Thompson.” A focal point of the hearing was the recent changes made by the FHFA to the GSE Loan-Level Price Adjustments, with Republicans criticizing these changes and Democrats offering support.

Industry News

CLO Returns Underperforming in 2023, New Issuance Declines

According to an article published by Bloomberg, collateralized loan obligation (CLO) market is facing rising funding costs and lower returns on investments. This has reduced CLO profitability and resulted in a decline in new CLO issuance, with volume falling 12% in Q1 2023 compared to the same period in 2022.

Industry News

Credit Card Balances Increased in Q1 2023

The Federal Reserve Bank of New York’s quarterly report on household debt underlined an increase in consumer credit card borrowing. Credit card balances surged to nearly $1 trillion by the end of the quarter, representing a 17% increase from the previous year's $840 billion.

Industry News

CRE Downturn Felt by Office Building Sector

According to the Wall Street Journal, the office building market is facing significant challenges as a result of declines in property values, due to a combination of factors, including lower return-to-office rates and demand for space and higher interest rates. Data from MSCI reveals that investors purchased only $10.7 billion in office property during Q1 2023, representing a 68% decrease compared to the same period last year. Furthermore, delinquencies of commercial mortgage-backed securities backed by office loans reached 2.77% in April, the highest level since 2019.

Industry News

FHFA Issues RFI on GSE’s Single Family Pricing Framework

On May 15th, the FHFA issued a request for input (RFI) regarding Fannie Mae and Freddie Mac’s (GSEs) single-family pricing framework. The RFI seeks to gather feedback on various aspects of the FHFA’s goals and priorities, and the process for determining the GSEs' single-family upfront guarantee fees linked to their Enterprise Regulatory Capital Framework (ERCF).

Industry News

Defaults of CLOs Backed by Apartment Buildings Are on the Rise

The Wall Street Journal reports that defaults in collateralized loan obligations (CLOs) used to fund commercial real estate (CRE) purchases are on the rise. Nearly $88 billion in securitized commercial mortgages are at risk of default, with 42% of these backed by apartment buildings. Rental apartments accounted for the majority of CRE CLOs issued in 2021 and 2022, which due to shorter terms and floating rates, make property owners more susceptible to sudden shifts in the market.

Industry News

CFPB V. NCSLT Oral Arguments Scheduled for May

The U.S. Court of Appeals for the Third Circuit has scheduled oral arguments in the case of the CFPB v. NCSLT for May 17, 2023, after being previously scheduled for March. The court’s ruling will play a critical role in determining whether securitization Trusts will be classified as “covered persons” under the Consumer Financial Protection Act (CFPA) and whether they will be subject to CFPB enforcement.

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