Companies Eye RMBS, Signaling Comeback

If two companies have their way, residential mortgage-backed securities (RMBS), kept on the ice since losing steam in the throes of the Great Recession, may make a comeback.

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According to the ""_Wall Street Journal_"":http://online.wsj.com/article/SB10001424052702304911104576445931873088702.html, ""BlackRock Inc."":http://www2.blackrock.com/global/home/index.htm and ""Two Harbors Investment Corp."":http://twoharborsinvestment.com/, a publicly traded real estate company headed up by Goldman Sachs traders, said they may make a return to AA bond ratings ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô a hoped-for development in lieu of the housing credit pressure facing GSEs ""Fannie Mae"":http://www.fanniemae.com/kb/index?page=home and ""Freddie Mac"":http://www.freddiemac.com/.

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""Rating agencies' requirements are such that it's largely uneconomic to create a deal,"" the ""_Journal_"":http://online.wsj.com/article/SB10001424052702304911104576445931873088702.html reports Randy Robertson, co-owner of ""BlackRock's"":http://www2.blackrock.com/global/home/index.htm securitized asset investment division, as saying. ""So the loans can't get made ... and you continue to have pressure on housing and the housing recovery.""

This comes even as credit-rating companies hesitate to lighten lending standards, given uncertain market conditions, servicing regulations and rules on the way from Washington, and the desire for a credit expansion in the broader economy ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô something thought possible if profitable deals move forward in the RMBS market and on the shoulders of REITs like the two companies.

According to the ""_Journal_"":http://online.wsj.com/article/SB10001424052702304911104576445931873088702.html, ""BlackRock"":http://www2.blackrock.com/global/home/index.htm plans to start originating more jumbo mortgages with the $1 billion fund it maintains, underscoring the role that RMBS may potentially play as securitized collateral. Meanwhile, ""Two Harbors"":http://twoharborsinvestment.com/ means to attempt $250 million in RMBS.

Tom Deutsch, executive director of industry group ""American Securitization Forum"":http://www.americansecuritization.com/, says that any RMBS issuance is a good first start, as reported by the ""_Journal_"":http://online.wsj.com/article/SB10001424052702304911104576445931873088702.html. He adds that the $11 trillion U.S. mortgage market would also need AAA bonds in order to attract more investors.