Investors Concerned by New RMBS of Riskier Loans

NEW YORK, June 17 (IFR) – Caliber Home Loans this week sold the first rated non-prime home loan securitization since the financial crisis, a US$137m mortgage bond deal that set an uneasy tone for the sector’s reopening.

The deal was a success with some market participants, who noted that demand outstripped supply by as much as six times on the deal’s top class.

But others, mindful of the lax controls in older-vintage residential mortgage deals, said the deal both expanded credit to riskier borrowers and cut back investor protections.

“Our expectation was that as credit expands, governance would become better,” said Dimitri Rabin, global RMBS and covered bond strategist at Loomis Sayles & Company.

“Instead, I was surprised [the deal] expanded credit and was rated – and the quality of the governance had declined pretty substantially.

Rest from Reuters here…