Regulatory and macro issues continue to hinder a comprehensive recovery for both the wider economic landscape and the securitization sector, and they’re not going away anytime soon, according to speakers at the 2012 Securitization Market Outlook panel at ASF2012 conference in Las Vegas Monday morning. “It looks like 2012 is going to be a year of a whole lot of talk and very little action,” said Jordan Schwartz, partner at Cadwalader, Wickersham & Taft. Still on the industry’s to-do list: Dodd-Frank Act implementation, reform of the government-sponsored enterprises and managing the fallout from the European debt crisis, panelists said.
“Different sectors of the market are stabilizing at different rates, like channels,” according to Reginald Imamura, executive vice president at PNC Bank. “Certain channels are just broken still,” he added, pointing to fundamental struggles lingering in the non-agency residential mortgage space.
It’s important to recognize that regulation is not just a banking issue, Imamura said. “These affect everybody, not just the banks,” he said. “That’s where it touches down, but really, it affects liquidity.” The challenge, Imamura emphasized, is that while many of the proposed rules make sense in isolation, their eventual implementation will not take place in a vacuum. “The impact of some of these rules combined could cause liquidity to evaporate,” he said.
Ganesh Rajendra, managing director and head of international asst and mortgage-backed strategy at Royal Bank of Scotland in London, told conference goers that part of the holdup on resolution to euro zone troubles lies in that European policy makers lack the coordination and cohesion of their U.S. counterparts. “It’s always going to be just enough to kick the can,” Rajendra said. “The most important issue is Greece and how you manage, or firewall, that contagion,” he said, calling the process a “noisy web” of policy and politics.
The optimism for residential mortgage securitization, present at last year’s conference, was noticeably absent this time around. “The once-a-year, twice-a-year [real estate investment trust] deal isn’t really a recovery,” Cadwalader’s Schwartz said, referring to the spattering of RMBS deals Redwood Trust has brought to market in recent years--the only new-issue transactions that market has seen since the crisis.
Schwartz also pointed to progress on the GSE front, with a number of bills proposing possibilities for a winddown floating around in Congress in the last year, conceding that none of them are very far along and are unlikely to be passed any time soon.