AMCAR Securitizations: Effective structure, stable performance

Sein recently reviewed the performance and structural integrity of all outstanding AMCAR securitizations and found the following:

  • Excess spread of each transaction is initially quite large and deteriorates over time as each transaction seasons. With early excess spread being applied as extra principal to either maintain or build the specified overcollateralization percentage
  • Reserve Accounts are always fully funded
  • Cumulative losses are well within our expected base loss assumption of 11%
  • Structural protections of the trusts; Accelerated Principal Amount, Reserve Account and Principal Parity Amount (PPA) have proven resilient with respect to the performance of underlying collateral
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Review of Fed Study Using Survey Data to Understand Housing Dynamics

Sein is always interested in new research that helps shed light on the complex dynamics of the housing market. A recently updated research note by Andreas Fuster and Basit Zafar of the Federal Reserve Bank of New York (FRBNY) provides important insights in understanding the impact of monetary policy on the dynamics of housing demand in relation to mortgage rates and down payment requirements. Specifically, using the change in willingness to pay (WTP), Fuster and Zafar conclude:

  • A decrease in down payment requirements or an increase in non-household wealth has large affects on WTP;
  • A decrease of 2-percentage points in rates changes WTP on average by 5%.
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Building Credit Models with GSE Data

We explore the usefulness of loan-level performance data now being published by Fannie Mae and Freddie Mac, the two main US housing GSEs. A recent article by Scott Anderson and Janet Jozwik, titled “Building a Credit Model Using GSE Loan-Level Data” published in the Spring 2014 “Journal of Structured Finance”, gives us the opportunity to explore the practical usefulness of this data. Their work confirms that the GSE data is suitable for building a credit model, as it provides enough information to model the behavior of the borrower, including the probability of becoming delinquent.

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Fannie & Freddie Common Securitization Solution

We are encouraged that the Federal Housing Finance Agency (FHFA) has taken towards greater transparency in the securitization market. More specifically, we are encouraged that the Government Sponsored Entities (GSEs) are adapting an event driven open architecture for the implementation and launch of the Common Securitization Solution (CSS). We believe that this framework will become the default standard. As we look to launch and expand our pilot program in 2015, we will be offering a white-label version of our platform to active issuers who desire to centralize their securitization programs.

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“A strong relationship exists between MDR and FICO score at origination: the lower the FICO, the higher the default rate.”