Pub Date : 2023-05-31DOI: 10.3905/jsf.2023.29.1.104
{"title":"Highlights from the Structured Finance Association","authors":"","doi":"10.3905/jsf.2023.29.1.104","DOIUrl":"https://doi.org/10.3905/jsf.2023.29.1.104","url":null,"abstract":"","PeriodicalId":51968,"journal":{"name":"Journal of Structured Finance","volume":"29 1","pages":"104 - 111"},"PeriodicalIF":0.4,"publicationDate":"2023-05-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46376256","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
J. Trunzo, Pramit Mukherjee, Laila Kollmorgen, Michelle R. Manuel
This article provides an overview of collateralized loan obligations (CLOs) as securitizations backed by diverse portfolios of senior secured leveraged loans, their historical performance and default rates, and how they differ from other securitization vehicles. It explains the resilience of the asset class, due in part, to covenants that limit risk exposure and offer early identification of stress. This article also discusses the deterioration of covenant quality in leveraged loans and the benefits and drawbacks of covenant-lite loans. The authors refute concerns that CLOs will be the next source of a financial crisis and explain the regulatory and investor scrutiny they are subject to. The European CLO market is well regulated, transparent, and has improved liquidity, with increasing interest in investment-grade tranches. Issuers have adapted and innovated in response to crises, leading to new structural modifications and ESG adoption. The market is expected to remain robust due to its ability to adapt and the improved investor base.
{"title":"Unlocking the Resilience of Collateralized Loan Obligations: Exploring Historical Global Performance, Regulatory Scrutiny, and the EU Market’s Innovations","authors":"J. Trunzo, Pramit Mukherjee, Laila Kollmorgen, Michelle R. Manuel","doi":"10.3905/jsf.2023.1.159","DOIUrl":"https://doi.org/10.3905/jsf.2023.1.159","url":null,"abstract":"This article provides an overview of collateralized loan obligations (CLOs) as securitizations backed by diverse portfolios of senior secured leveraged loans, their historical performance and default rates, and how they differ from other securitization vehicles. It explains the resilience of the asset class, due in part, to covenants that limit risk exposure and offer early identification of stress. This article also discusses the deterioration of covenant quality in leveraged loans and the benefits and drawbacks of covenant-lite loans. The authors refute concerns that CLOs will be the next source of a financial crisis and explain the regulatory and investor scrutiny they are subject to. The European CLO market is well regulated, transparent, and has improved liquidity, with increasing interest in investment-grade tranches. Issuers have adapted and innovated in response to crises, leading to new structural modifications and ESG adoption. The market is expected to remain robust due to its ability to adapt and the improved investor base.","PeriodicalId":51968,"journal":{"name":"Journal of Structured Finance","volume":"29 1","pages":"12 - 31"},"PeriodicalIF":0.4,"publicationDate":"2023-05-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49266599","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
R.C.M. McDonough, K. Yalamanchili, Jay Lown, Michael Khankin, Sam Dunlap
This article discusses the outlook for the US housing market and its expected impact on the trading dynamics of residential mortgage-backed securities (RMBS) in 2023. Despite the current reduced affordability of housing due to higher mortgage rates and surging home values, single family home prices are unlikely to experience a sharp decline, with growth expected in the second half of the year. The limited housing supply will lead to increased upward pressure on home prices and stronger performance in RMBS. Non-qualified mortgage products may face a challenging year in 2023, with delinquencies and losses expected to rise. Credit performance will be critical, and demand for affordability products is likely to increase. Overall, the outlook for the RMBS market remains challenging due to rising interest rates, tightening monetary policy, and the expected increase in the supply of mortgage-backed securities. However, the high level of home equity in the US housing market will create skin in the game for borrowers, as well as higher collateral values to protect against credit deterioration.
{"title":"Navigating the 2023 US Housing Market: Impact on Residential Mortgage-Backed Securities","authors":"R.C.M. McDonough, K. Yalamanchili, Jay Lown, Michael Khankin, Sam Dunlap","doi":"10.3905/jsf.2023.1.157","DOIUrl":"https://doi.org/10.3905/jsf.2023.1.157","url":null,"abstract":"This article discusses the outlook for the US housing market and its expected impact on the trading dynamics of residential mortgage-backed securities (RMBS) in 2023. Despite the current reduced affordability of housing due to higher mortgage rates and surging home values, single family home prices are unlikely to experience a sharp decline, with growth expected in the second half of the year. The limited housing supply will lead to increased upward pressure on home prices and stronger performance in RMBS. Non-qualified mortgage products may face a challenging year in 2023, with delinquencies and losses expected to rise. Credit performance will be critical, and demand for affordability products is likely to increase. Overall, the outlook for the RMBS market remains challenging due to rising interest rates, tightening monetary policy, and the expected increase in the supply of mortgage-backed securities. However, the high level of home equity in the US housing market will create skin in the game for borrowers, as well as higher collateral values to protect against credit deterioration.","PeriodicalId":51968,"journal":{"name":"Journal of Structured Finance","volume":"29 1","pages":"32 - 52"},"PeriodicalIF":0.4,"publicationDate":"2023-05-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41921566","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Jack Ervasti, Jennifer E. Thomas, Peter Hajjar, Dmitry Kiselyov, Stacey Schacter
The consumer ABS market provides a large and growing source of funding to the US economy. Historically the market consisted primarily of auto loans, credit card receivables, and student loans. Over the past decade, esoteric ABS issuance has proliferated, as more markets are able to securitize cash flows to unlock a lower cost of funding relative to comparable corporate alternatives. Sectors that did not exist 10 years ago have grown to be large and liquid market sectors, including marketplace lending, solar, property assessed clean energy, and consumer handset receivables. This trend has been aided by a pullback in bank lending, driven by post-great financial crisis (GFC) regulation and capital regime changes. The Fed’s imposition of higher interest rates throughout 2022 and into 2023 is designed to slow the economy and reduce inflation, but is also likely to put pressure on consumer performance in the coming months. While consumer balance sheets remain relatively healthy, excess savings accumulated during the pandemic have been eroding, and delinquency rates are expected to rise. While performance is expected to deteriorate, consumer ABS structures have gotten safer since the GFC—including via more credit enhancement and better-quality collateral—and some of the longer-standing structures have shown their ability to withstand a variety of macroeconomic environments without taking a loss. Despite the more robust structures, performance of newer esoteric asset classes will be watched closely as we enter a more volatile macroeconomic environment. The ABS market will continue to evolve in the coming years, as large structural change has tended to correspond to material changes in macroeconomic conditions. Regardless of the changes, we expect the market to remain an integral source of funding for the US consumer.
{"title":"Evolution in the Consumer ABS Market (Past, Present, and Future)","authors":"Jack Ervasti, Jennifer E. Thomas, Peter Hajjar, Dmitry Kiselyov, Stacey Schacter","doi":"10.3905/jsf.2023.1.156","DOIUrl":"https://doi.org/10.3905/jsf.2023.1.156","url":null,"abstract":"The consumer ABS market provides a large and growing source of funding to the US economy. Historically the market consisted primarily of auto loans, credit card receivables, and student loans. Over the past decade, esoteric ABS issuance has proliferated, as more markets are able to securitize cash flows to unlock a lower cost of funding relative to comparable corporate alternatives. Sectors that did not exist 10 years ago have grown to be large and liquid market sectors, including marketplace lending, solar, property assessed clean energy, and consumer handset receivables. This trend has been aided by a pullback in bank lending, driven by post-great financial crisis (GFC) regulation and capital regime changes. The Fed’s imposition of higher interest rates throughout 2022 and into 2023 is designed to slow the economy and reduce inflation, but is also likely to put pressure on consumer performance in the coming months. While consumer balance sheets remain relatively healthy, excess savings accumulated during the pandemic have been eroding, and delinquency rates are expected to rise. While performance is expected to deteriorate, consumer ABS structures have gotten safer since the GFC—including via more credit enhancement and better-quality collateral—and some of the longer-standing structures have shown their ability to withstand a variety of macroeconomic environments without taking a loss. Despite the more robust structures, performance of newer esoteric asset classes will be watched closely as we enter a more volatile macroeconomic environment. The ABS market will continue to evolve in the coming years, as large structural change has tended to correspond to material changes in macroeconomic conditions. Regardless of the changes, we expect the market to remain an integral source of funding for the US consumer.","PeriodicalId":51968,"journal":{"name":"Journal of Structured Finance","volume":"29 1","pages":"53 - 64"},"PeriodicalIF":0.4,"publicationDate":"2023-05-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47259078","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This article reflects on the author’s experience working in the mortgage-backed securities (MBS) sector during the 1970s, 80s, and 90s on Wall Street, and the evolution of the market that eventually led to the 2007 mortgage meltdown and the 2008 financial crisis. MBS emerged as a promising type of investment, offering high returns and lower risks than products from other fixed-income sectors. However, the gradual erosion of “the mortgage gets paid first” assumption was somehow overlooked during the boom years, as demand increased, underwriting guidelines got looser, and new affordability products emerged. Meanwhile, credit managers and MBS experts combined to become deal managers, leading to a whole new sector of the markets: collateralized debt obligations (CDOs). The market for CDOs grew, and new buyers of subordinate MBS tranches contributed to a rapid expansion in the issuance of MBS backed by subprime and alt-A mortgage loans. The whole episode raises important questions about the responsibility of market participants and the role of regulations in the evolution of the MBS market.
{"title":"COMMENTARY: The Great Financial Crisis as Seen by a Long-Time Veteran and Participant","authors":"Vincent Fiorillo","doi":"10.3905/jsf.2023.1.155","DOIUrl":"https://doi.org/10.3905/jsf.2023.1.155","url":null,"abstract":"This article reflects on the author’s experience working in the mortgage-backed securities (MBS) sector during the 1970s, 80s, and 90s on Wall Street, and the evolution of the market that eventually led to the 2007 mortgage meltdown and the 2008 financial crisis. MBS emerged as a promising type of investment, offering high returns and lower risks than products from other fixed-income sectors. However, the gradual erosion of “the mortgage gets paid first” assumption was somehow overlooked during the boom years, as demand increased, underwriting guidelines got looser, and new affordability products emerged. Meanwhile, credit managers and MBS experts combined to become deal managers, leading to a whole new sector of the markets: collateralized debt obligations (CDOs). The market for CDOs grew, and new buyers of subordinate MBS tranches contributed to a rapid expansion in the issuance of MBS backed by subprime and alt-A mortgage loans. The whole episode raises important questions about the responsibility of market participants and the role of regulations in the evolution of the MBS market.","PeriodicalId":51968,"journal":{"name":"Journal of Structured Finance","volume":"29 1","pages":"83 - 89"},"PeriodicalIF":0.4,"publicationDate":"2023-05-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41457536","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Adelaide Morphett, Joseph Lau, Nathan Gabig, Izzet Bensusan, Emanuella Scura, Aiman El Nahas, Adam Grainger, Robert McDonough
This article provides an overview of ESG investment considerations in the context of the broader capital markets, with a focus on structured finance. Perspectives differ on defining an “ESG transaction,” both from an asset class and a market perspective. Various regulatory pronouncements have taken the market a long way in understanding the factors, though more work is to be done. Unique characteristics matter for structured credit investors, as examples herein show, and efforts to expand the use of ESG framing tools have certain inherent limitations, such as data. Greenwashing is a broad market issue to which structured credit financing is not immune. This article also explores examples within the universe of structured products where ESG principles are or can be integrated into an investment framework.
{"title":"Incorporating ESG in Structured Finance","authors":"Adelaide Morphett, Joseph Lau, Nathan Gabig, Izzet Bensusan, Emanuella Scura, Aiman El Nahas, Adam Grainger, Robert McDonough","doi":"10.3905/jsf.2023.1.154","DOIUrl":"https://doi.org/10.3905/jsf.2023.1.154","url":null,"abstract":"This article provides an overview of ESG investment considerations in the context of the broader capital markets, with a focus on structured finance. Perspectives differ on defining an “ESG transaction,” both from an asset class and a market perspective. Various regulatory pronouncements have taken the market a long way in understanding the factors, though more work is to be done. Unique characteristics matter for structured credit investors, as examples herein show, and efforts to expand the use of ESG framing tools have certain inherent limitations, such as data. Greenwashing is a broad market issue to which structured credit financing is not immune. This article also explores examples within the universe of structured products where ESG principles are or can be integrated into an investment framework.","PeriodicalId":51968,"journal":{"name":"Journal of Structured Finance","volume":"29 1","pages":"65 - 76"},"PeriodicalIF":0.4,"publicationDate":"2023-05-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45879725","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
FIIN (the Fixed Income Investor Network) has developed a practitioner-oriented structured finance testing and certification program in-house to address the current vacuum of educational opportunity to learn best practices. It is an obstacle not only for structured finance practitioners to seek continuous professional development, but also to the further development of depth, liquidity, and coverage in the structured finance market itself. Since its formation in 2018, FIIN has viewed education as mission critical. The support for education is there in FIIN’s motto: “Better investors make better markets.” Having grown rapidly in the past five years—to 550 individual members from more than 250 firms—and drawing on the talents of veteran buy-side and structured finance-specific training talent, FIIN is uniquely positioned to offer professional certification. And given that the buy-side always pays when structured securities are not rated or priced for fully-loaded risk, FIIN is the obvious entity to take the lead in setting educational standards for the market. The target date for the beta launch is October 2023.
{"title":"Structured Finance Certification: FIIN’s Key Contribution to Market Resilience","authors":"Ann Rutledge","doi":"10.3905/jsf.2023.1.153","DOIUrl":"https://doi.org/10.3905/jsf.2023.1.153","url":null,"abstract":"FIIN (the Fixed Income Investor Network) has developed a practitioner-oriented structured finance testing and certification program in-house to address the current vacuum of educational opportunity to learn best practices. It is an obstacle not only for structured finance practitioners to seek continuous professional development, but also to the further development of depth, liquidity, and coverage in the structured finance market itself. Since its formation in 2018, FIIN has viewed education as mission critical. The support for education is there in FIIN’s motto: “Better investors make better markets.” Having grown rapidly in the past five years—to 550 individual members from more than 250 firms—and drawing on the talents of veteran buy-side and structured finance-specific training talent, FIIN is uniquely positioned to offer professional certification. And given that the buy-side always pays when structured securities are not rated or priced for fully-loaded risk, FIIN is the obvious entity to take the lead in setting educational standards for the market. The target date for the beta launch is October 2023.","PeriodicalId":51968,"journal":{"name":"Journal of Structured Finance","volume":"23 8","pages":"77 - 82"},"PeriodicalIF":0.4,"publicationDate":"2023-05-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41244061","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-01-31DOI: 10.3905/jsf.2023.28.4.112
{"title":"Highlights from the Structured Finance Association (SFA)","authors":"","doi":"10.3905/jsf.2023.28.4.112","DOIUrl":"https://doi.org/10.3905/jsf.2023.28.4.112","url":null,"abstract":"","PeriodicalId":51968,"journal":{"name":"Journal of Structured Finance","volume":"28 1","pages":"112 - 119"},"PeriodicalIF":0.4,"publicationDate":"2023-01-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46079490","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
京公网安备 11010802042870号
京ICP备2023020795号-1
扫码关注我们
求助内容：
应助结果提醒方式：