Securitization which included mortgage backed securities is accelerated in the mid-1990s but the total amount of mortgage-backed securities issued almost tripled between 1996 till 2007, to $.7.3 trillion. From the MBS at can found that the securitized share of subprime mortgage was increased around 21% which from 54% in 2001 to 75% in 2006. The credit risk in sub-prime mortgage was through the securitization mechanism and with a wide arena of investor globally and the impact of the credit crisis is felt on a global level was got passed on to other investor .In 2008 American homeowners, corporations and consumers were owed roughly around $25 trillion while American banks retained about $8 trillion of that total directly as traditional mortgage loans and the remaining of $10 trillion was came from the securitization market. The securitization markets were starts to close down in the spring of 2007 and in the fall of 2008 shut-down. But in the February 2009, Ben Bernanke stated that securitization markets remained effectively shut with the exception of conforming mortgage.
Financial institution and banks need to resorted to securitization of the pool of asset to shift the risk to investors in these securities as well as to obtain funds well ahead of the scheduled tenor of these asset once mortgage backed securities started flooding the market. Besides that it's also implied that organizations/issuers in repeatedly re-lend a given sum, greatly providing a multiplier effect of the underlying national and increased their fee income. The issuers could lower their underwriting practices to increase their loan disbursements with increasing securitization deals being struck. Moreover, issuers can through deep understanding of the securitization process, practitioners' technical, regulatory, and tax knowledge to be recognized once again as the standard of excellence in securitization accountancy services.
International Securitization Report which is a world leading source in every market and every class of authoritative and independent news and analysis on the issuance of, and investment in, asset-backed and mortgage-backed securities in the Securitization Practices. ISR boasts extensive global contacts with the principle decision-makers in the securitization market which can ensures that readers are briefed on every aspect whether it is latest on a new structure, ground-breaking deal, a new mandate or a recent study of market trend. Besides that ISR also offers incisive coverage of significant news with commentary from the leading professionals involved and reports on the keys element of every important deal.
Internationally, the most comprehensive accounting standard on securitization is the SFAS which from Financial Accounting Standard Board .The Financial Accounting Standard Board (FASB) is a private, not-for-profit organization whose primary purpose is to develop generally accepted accounting principle which called (GAPP) within the United States in the public's interest. The Securities and Exchange Commission (SEC) was use in designated the FASB as the organization responsible for setting accounting standard for the public of companies and it was created in 1973 but replaced the Committee on Accounting Procedure (CAP) and the Accounting Principle Board(APB). FASB has also published an exposure draft of an FASB staff position (FSP) that would require about additional of disclosures relating to variable interest entities, pending effectiveness of the other amendments. The Financial Accounting Standard Board mission is to establish and improve standards of financial accounting and reporting for the guidance and education to the public which including issuers, auditors, and users of financial information. Financial Accounting Standard Board have 5 goals which are the first improve the usefulness of financial reporting by focusing on the primary characteristics of relevance and reliability, and on the qualities of comparability and consistency. Secondly, improve common understanding of the nature and purpose of information in financial reports. Thirdly, promote international convergence of accounting standards concurrent with improving the quality of financial reporting. Forty, consider promptly any significant areas of deficiency in financial reporting that might be improved through standard settings and the lastly is keep standards current to reflect changes in methods of doing business and in the economy to achieve the mission of Financial Accounting Standard Board.
Meyer Brown which one of the largest structured finance practices in the world with over 140 securitization lawyers in offices across Americans, Europe, and the Asia with that size comes the knowledge, experience and manpower tackle transactions of any scale in almost jurisdiction. As a financial market becomes increasingly integrated, working with a law firm that understands the complexities and nuances of the key technologies and markets can deliver that elusive competitive edge. Widely acknowledged as having one of the premiere securitization practices in the world and securitized virtually every conceivable asset type. When combined with our experience in the conduit, CDO and synthetic markets had offer experienced teams with the intellectual depth and industry insight needed to assist clients as they explore and maximize both current and developing market opportunities. Many of the securitization transactions that are commonplace today were 1st initiated by members and continue to be at the forefront of new development- whether it is the securitization of IP or non-performing loans, securitization as an acquisition financial tool. Large rescue structures are used for distressed assets or structured credit products. Company are adept at handling the issues that arise as financial products converge and thrive on the challenges this presents and by drawing the collective experience, no matter how a transaction are evolves they are deliver creative, practical, business-oriented solutions. Mayer Brown has been a leader in the creation and expansion of the global ABS market which with engaged on transatlantic projects that required multi-jurisdictional teams that few other firms can be offer and strongest securitization teams. In addition they have a pre-eminent practice in emerging markets from their well-establish transatlantic positions. Now, they have a depth of resources in these increasingly major markets where the capability to lead innovative transactions with experienced teams has never been more desperate. Amongst other innovations, they structured the world's first "diversified payment right" transaction and have structured in many similar programs that have been the 1st of their kind in their jurisdiction in 2000 for Finansbank of Turkey. The firm's unparalleled regulatory knowledge, resulting from decades of industry leadership on a range of securities, bank capital, accounting and other issues provides us with a perspective that give clients a perspective that can give clients a critical edge in creative deal structuring.
Asset- and Mortgage-backed Securities
They are consistently recognized as one of the leading law firms in ABS transactions and regularly represent the transactions such as arrangers, underwriters, credit enhancers, sellers, trustees, originators and investors.
Equally comprehensive and international in scope which includes structuring securitizations of first-lien, home-equity and subprime residential mortgages, as well as the re-securitization of mortgage-backed certificates and securitization of commercial mortgages.
Do more auto related securitizations that other firm and capably analyze and implement transactions which included auto leases.
Forefront in helping leasing companies, for their own account and to coordinate with titling trusts and securitization structures banks and other auto lessor to establish like-kind exchange programs.
IP and whole Business Securitization
Since the earliest securitizations of music catalogs such as Bowie bonds in 1997, IP and whole business securitization is a growing area and one in which they have been involved for many years.
Conduits
Represent essentially every bank sponsor in at least some of their CP conduit transactions.
Helped establish and restructure a significant number of other type of structured investment vehicles with complex capital structures.
Structured Products
Increasingly integral part of our securitization practice.
Include synthetic CDOs, equity, index, bonds, and credit linked notes involving different asset classes.
Commodities as well as related commodity derivative products to recognize for guide on structured secured.
CDOs
Helped smaller banks and insurance companies to establish the trust preferred CDO market as a capital raising vehicle.
Needing to raise smaller amounts of hybrid capital are indispensable to smaller or regional banks and insurance companies.
http://www.mayerbrown.com/publications/article.asp?id=819&nid=6
http://www.occ.treas.gov/handbook/assetsec.pdf
Inaccurate Credit Ratings
Inaccurate credit ratings is the credit rating process was faulty and the high ratings given by credit rating agencies encouraged the flow of investor funds into mortgage-backed securities which are helping finance the housing boom. Now, credit rating agencies are under scrutiny for having given investment-grade ratings to CDOs and MBs which based on subprime mortgage loans. These high ratings were believed been justified because of the risk reducing practices, including credit default insurance, equity investors willing to be bear the first losses and over-collateralization. However, there are also indications that some involved in rating subprime-related securities knew at the time that the rating process was faulty. Emails exchanged between the employees of rating agencies, dated before credit markets deteriorated and put in the public suggest that some rating agency employees suspected that lax standards for rating structured credit products would result in major problems.
Credit rating agencies are now under scrutiny for having given investment-grade ratings to MBSs based on risky subprime mortgage loans. These ratings were believed justified because of risk reducing practices. Credit rating has become part and parcel of life for many; adverts urge us to take out loans to buy goods or services whether we look on television, radio or in the newspaper. Credit ratings was affect nearly all organization regardless of whether an organization issues debt and while 70% of the survey respondents work for an organization that rated debt and nearly every respondent works for an organization make the investment decision by using ratings from NRSROs.
Market Penetration of Rating Agencies among Organizations with Rated Debt
(Percentage of Respondents from Organizations with Rated Debt)
Standard & Poor's
9 6 %
Moody 's
9 3
F i t c h
3
Dominion Bond Rating Service
4
From the table we found that while many organizations are able to issue debt without a rating from an NRSRO, non-rated debt is typically charge the higher fees and interest rates and we can make a decision about many organization are reluctant to issue or unable to issue debt without an NRSROs. In 2008, most of the risk rating agencies were unable to give proper ratings to complete instruments but several products and financial institutions which include hedge funds, and rating agencies are largely if not completely unregulated.
34% of corporate practitioners was believe that the ratings on their organization's debt are inaccurate which from the information from the survey but at two years earlier had 29% of respondents believe the ratings of their organization's debt are inaccurate while this seems to indicate a continued loss of confidence in the NRSROs. There is a natural tension about the issuers and credit rating agencies since issuers often believe that they should deserve a higher rating than granted.
Let's discuss about the Credit rating agencies (CRAs) which the agencies are very often have been criticized for announce inaccurate credit ratings and are suspected of being explored to conflicts of interest but CRAs still remained largely unregulated. Rating quality is unobservable and enforcing regulations are costly which based on the Pagano & Immordino of the optimal regulation of CRAs. Credit rating agencies (CRAs) play a very meaningful role in today's financial markets. In principle, credit ratings should serve as third-party opinions about the solvency of a debt instrument and improve efficiency and transparency in financial market and should reduce the information asymmetry between an issuer of a debt instrument and the potential investors. The CRAs pronounce that their credit ratings should not be interpreted as default probabilities and that credit ratings are rather opinions about risk only. The higher is the credit rating of a debt instrument means that the less likely it should be to default and the longer it should take to default.
CRAs have been involved in several times and have been confronted with heavy criticism for publishing inaccurate credit ratings. For an examples are the Asian crisis, where the CRAs gave Thailand an investment-grade rating until 5 months after the start of the crisis or the Enron case, where the CRAs gave Enron investment-grade until days before it went bankrupt. And an example for public discussion about the behavior of CRAs is the debacle of subprime lending in the USA with its impact on financial markets globally. Furthermore, CRAs are often use in confronted with the suspicion of being exposed to conflict of interest as mostly the issuers of the debt instrument pay for the credit rating which CRAs offer additional consulting services to their clients and 90% of CRAs revenues is come from the fees account. The CRAs not only issued credit ratings for structured finance instruments, but also supported investment banks in designing them. Despite these objections, CRAs remained themselves largely unregulated, but the discussion on further regulation is active in the media as well as in institutions of financial market supervision. The EU-commission and US politicians blamed the CRAs of being jointly responsible for the financial crisis after the subprime loan crisis in 2007. In August 2007, the EU- commission considered reacting with legal regulations for the credit rating agencies and also US authorities announced to investigate the role of CRAs in the subprime loan crisis that was set. However, very little progress has been made in implementing those proposals in national laws and regulations.
High ratings encouraged investors to buy securities backed by subprime mortgages and helping finance he housing boom. The way ratings and reliance on agency ratings were been used to justify investments led many investors to treat securitized product as equivalent to higher quality securities and it was exacerbated by the SEC's removal of regulatory barriers and it had reduced of disclosure requirements in the wake. As they were paid by investment banks and other firms that organize and sell structured securities to investors, critics will allege that the rating agencies suffered from conflicts of interest. On 3 December 2008, the SEC approved measures to strengthen oversight of credit rating agencies, following a ten-month investigation that found "significant weaknesses in ratings practices," including conflicts of interest. Rating agencies lowered the credit ratings on $1.9 trillion in mortgage backed securities between 2007 and 2008. Financial institutions felt they had to lower the value of their MBS and acquire additional capital so as to maintain capital ratios. The value of the existing shares will reduces when involved the sale of new shares of stock and thus ratings downgrades lowered the stock prices of many financial firms.
Selling a house get much harder
http://loan-mortgage-loan.blogspot.com/2008/12/mortgage-crisis-home-loans-are-harder.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+SecondMortgageLoan+%28second+mortgage+loan%29
