GLG News by Asset Backed Securities Experts

Maureen BoltonPrincipalGlobal Capital Access

Can a lender and borrower have the same interests?

March 9, 2007

Analysis of:Debating Standards for Mortgage Lenders | www.wsj.com

This WSJ article is a cogent summary of recent efforts by State legislatures to protect borrowers against subprime lenders.

If implemented, any one of these proposed laws will immediately cut-off a vital source of funding for subprime borrowers.

In addition, the statutes would generate a significant amount of business for class action lawyers.

Joseph SmithPresident and CEODefault Mitigation Management

Perfect Storm in Default: Mortgage Servicing News Febraury

March 5, 2007

Analysis of:Subprime Game's Reckoning Day | online.wsj.com

I agree with the Wall Street Journal article. I had an article in Mortgage Servicing News in the February MBA Servicing Conference Issue title the "Perfect Storm in Defualt." My remarks and commentary are attached below.

The issues raised in the Wall Street Journal article are applified and dimensioned in my article.

Highlights the need for different workout solutions or face a liquidity crisis for mortgages and possibly the whole MBS market.

Highlights the needs for different thinking than exists in the current Pooling and Servicing Agreements.

Points the issues of why we are not only headed to recession but a bad recession.

Maureen BoltonPrincipalGlobal Capital Access

The Difference Between a Debt-Market Bomb and Credit Development

February 27, 2007

Analysis of:Debt-Market Bomb | articles.moneycentral.msn.com

Mr. Jubak's article is definitely worth reading, if only to hear his explanation of the current risks being taking by bond investors: insurance.  In his explanation, Mr. Jubak does a terrific job of dissecting credit default swaps and proceeds to inform us that the increase in their availability is causing bond buyers to disregard risks.

Maureen BoltonPrincipalGlobal Capital Access

World's Top MBS Manager Denounces Predictions of Systemic Credit Risk

February 16, 2007

Analysis of:Structured Finance "can weather bad debt conditions" | www.financialnews-us.com

This article represents the sole rational and credible (by virtue of the speaker's managing the world's largest bond funds) description of the current mbs market conditions and the impact on mbs investors.

Maureen BoltonPrincipalGlobal Capital Access

The Story Behind The Story

February 16, 2007

Analysis of:Mortgage Hot Potatoes | online.wsj.com

The article describes Wall Street's increased intent to "put-back" subprime loans to the lenders who sold them and the consequent impact such requests have on subprime lenders without access to funds.

Maureen BoltonPrincipalGlobal Capital Access

Friends With Benefits

February 16, 2007

Analysis of:A Cautious Welcome | www.economist.com

This article is a concise description of the economic and political relationship between China and Africa.  Worth reading, since the impact of this relationship is broader than one would assume.

Maureen BoltonPrincipalGlobal Capital Access

Subprime Market a Boon to Most Borrowers

February 9, 2007

Analysis of:The Politics of Subprime | online.wsj.com

This WSJ editorial is a persuasive, cogent response to the current Hill hearings on subprime mortgage delinquencies.  After expressing some doubts about certain attendees of the hearings, the author concludes that the major complaintants of subprime mortgages are the same folks who would be putting political pressure on lenders to provide credit to subprime borrowers.

The author concludes by simply comparing  the size of the subprime mortgage market with the percentage of subprime loans that are seriously delinquent.

Maureen BoltonPrincipalGlobal Capital Access

Inadequate Research and Definition of Industry Terms Belies Portrayal of SubPrime Borrowers

December 14, 2006

Analysis of:Subprime Borrowers are Falling Behind on Payment | www.wsj.com

This article, which was published on the front page of the Wall Street Journal on December 5th, is a prime example of how lack of knowledge of an industry can lead to incorrect or unsubstantiated interpretation of market trends and data.

The authors report that "Subprime" borrowers are increasingly delinquent and that investors in Subprime mbs could lose principal even on investment-grade rated tranches, something that has never happened (except in the incidence of fraud) in the entire history of the US mbs market.


Since the authors do not provide the readers with an objective definition of subprime, or other salient facts which are essential to the article's message that subprime market participants are in danger, this article should be read with significant skepticism.

Maureen BoltonPrincipalGlobal Capital Access

Subprime Originations Adapt and Endure

October 6, 2006

Analysis of:Trends in US Residential Mortgage Products: Subprime Sector 1st Quarter 2006 | standardandpoors.com

1)S&P's position as a lead rating agency for subprime mbs enables it to obtain market data that would otherwise be unavailable.  Therefore, their quarterly trend reports are an especially accurate review of subprime market trends.
2)The report summarizes data from all originators of subprime mortgages that are securitized in S&P rated mbs and all securitizers (including Wall Street conduits) of subprime mbs.
3) The report contains details such as type of subprime products originated/securitized, characteristics of such products and break-down and credit enhancement levels for subprime pools.

Maureen BoltonPrincipalGlobal Capital Access

Will 40 year mortgages impact mbs performance?

October 6, 2006

Analysis of:Fitch Special Report: 40,45,50 Year Mortgages;Option ARMs, Hybrid ARMs and FRMs | fitchratings.com

This Special Report issued by Fitch on June 19th is the first analysis issued by one of the major rating agencies which addresses the latest  trend in mortgage products -longer durations.

The current interest rate and housing markets provide fertile ground for such products, since they are widely believed to increase the affordability of homes and to reduce payment shocks for borrowers with hybrid ARMs that are about to convert from their fixed to floating rates.

Fitch's research indicates that, while longer duration mortgages make up an increasingly percentage of rated mbs, any negative impact due to increased credit risk is minimal for the following reasons: a) 40+ Option ARMs hit their negam cap much earlier than 30 years b) the difference in interest rates between 30 and 40yr mortgages is only 25bps, hardly enough to attract current 30 year borrowers and c) the minimal difference in monthly payments is not likely to entice borrowers to 40 year durations as a way of buying more house.
Fitch concludes its analysis by illustrating how rapidly the negative impact of payment shock and negative/minimum equity can increase for 40+ mortgages that are structured with 30 year amortizations. 
A comparison is made between the final balloon payment for a 40 year duration mortgage and a similar 45 year mortgage. After 30 years, the 40 year borrowers owes 55% of the original principal balance and the 45 year borrower owes 69% of the original principal balance. 
The payment shock from 2/28 hybrid ARMs pales in comparison.

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