Asset Backed Securities

Kathy Shwiff of the WSJ reports that Standard & Poor’s Ratings Services has placed on watch for possible downgrade its ratings on 149 tranches worth a total of $6.42 billion from 43 U.S. cash flow and hybrid collateralized debt obligation of asset-backed securities transactions. The move follows last month’s downgrade of 793 classes of U.S. residential mortgage-backed securities backed by U.S. closed-end second-lien mortgage collateral issued in 2004, 2005 and 2006. All of the CDO tranches with ratings placed on CreditWatch with negative implications are from CDOs of asset-backed securities collateralized by structured finance securities, including U.S. RMBS backed by closed-end second-lien collateral. CDOs, which use sliced-and-diced assets such as subprime-mortgage bonds to create customized products offering various levels of risk, have been at the heart of steep write-downs at big banks and brokerage firms. To read full article click here.  […]

Bloomberg News and Reuters reports that Citigroup said that it had lost more money than it had made from financial instruments based on U.S. subprime mortgages.At the same time, the share prices of major U.S. securities firms fell on Wall Street amid fears about the effect of the mortgage crisis on earnings. William Mills, chief executive of Citigroup’s markets and banking division in Europe, said the bank had suffered “reputational damage” from the fallout even though the bank had made “adequate disclosures” to customers who were trading in collateralized debt obligations and similar instruments. To read the full article click here. […]

Kathleen Howley of Bloomboog reports that as storm clouds gathered over New York on July 10, Standard & Poor’s started a 10 a.m. conference call to discuss why the credit rating company was about to take its most dramatic action in more than two years.S&P analysts said they might cut ratings on $12 billion of the world’s worst-performing subprime mortgage bonds, some of them less than a year after they had been given investment-grade designations. Not since 2005, when it downgraded Ford Motor Co. and General Motors Corp., had S&P generated so much attention. To read full article click here. […]

David Scheer and Jesse Westbrook of Bloomberg report that U.S. regulators, concerned brokerages may have sold clients money-losing securities tied to subprime mortgages, are seeking information about how the investments were marketed, a person familiar with the situation said.The Financial Industry Regulatory Authority, which polices about 5,100 brokerages, sent letters Dec. 14 to more than a dozen firms that sell collateralized mortgage obligations, a type of security linked to home-loan payments, said the person, who declined to be identified because the inquiry isn’t public. One letter obtained by Bloomberg seeks sales spreadsheets, marketing materials, and procedures and methods for matching products to clients’ investment needs. Mounting losses from securities tied to home loans are prompting regulators to examine how Wall Street firms valued and promoted the products. Finra Chief Executive Officer Mary Schapiro said in September the agency was scrutinizing sales of mortgage-backed products to retirees, and had sent a round of letters seeking information on the transactions. To read [...]