Sector developments and company hires

Eminent domain mods introduced
To address the heightened risk to borrowers and investors of a multifamily property located in King County being taken by eminent domain (SCI 14 October), Fannie Mae has introduced a prospective modification to its multifamily loan and security agreement and its MBS prospectus for new transactions with properties located in the county. These modifications provide that: if state law requires the acquiring agency to reimburse the property owner for any prepayment premium, that prepayment premium is due; and if no such law exists at the time of a taking, a prepayment premium is due to the extent that the amount received exceeds the UPB, accrued interest and any other amounts due under the loan documents, other than the prepayment premium. For any MBS issued backed by properties in King County, additional disclosure will be provided to explain how prepayment premiums will be handled in cases of eminent domain.

Mortgage prisoner rule change
The UK FCA last week implemented rules that allow lenders to disapply certain minimum affordability assessment requirements introduced in 2014, stating that a “more proportionate affordability assessment” for 'mortgage prisoners' who have been unable to refinance (SCI 2 April) would reduce the harm caused by unaffordable borrowing and that it expected lenders to adapt their origination processes quickly. Fitch expects the move to increase prepayment rates in some RMBS, particularly pre-2014 owner-occupied mortgage pools with non-active lenders, high interest reversion rates (such as standard variable rates or equivalents) and capital repayment mortgages. However, immediate rating actions are not anticipated, given that higher prepayment rates may contribute to increased credit enhancement levels over time - albeit the positive effect may be offset by the larger concentration of residual loans with relatively weaker characteristics. The rule changes require non-active lenders to notify existing borrowers by 1 September 2020 of the option to seek refinancing with a different lender.

Non-core CMBS record
The record 23.3% share of esoteric collateral backing large loan/single-asset/single-borrower CMBS this year is largely attributable to the cold storage and life science sectors, which accounted for 66.2% of such non-core assets, according to Moody's. Although non-core commercial property types are often considered to be riskier than core ones - such as multifamily, office and retail - cold storage and life science properties are an exception, since they have structural qualities that foster performance stability. Both draw cashflow from tenants in industries with a high level of durable, inelastic demand, and have high barriers to entry that limit competition.

North America
AmWINS Group has named Alex Kaplan evp for alternative risk, responsible for leading a new strategy around the development of parametric solutions and other bespoke coverages, on both a stand-alone basis and in conjunction with other traditional and non-traditional solutions for client risk transfer. Prior to joining AmWINS, Kaplan spent 11 years at Swiss Re, where he most recently served as head of North America for the company’s public sector solutions unit.

NPL ABS inked
The Cassa Centrale Group, through Centrale Credit Solutions, has sold a €345m portfolio of non-performing, mortgage or unsecured, receivables transferred from 35 credit institutions via a vehicle dubbed Etna SPV. Arrow Global subscribed to the single class of ABS notes issued under the securitisation. Zenith Service is arranger, corporate servicer, master servicer, calculation agent and bondholder representative on the transaction. WhiteStar Asset Solutions Italia will perform portfolio management services. Banca IMI acted as advisor to Centrale Credit Solutions.

RFI on pooling practices
The FHFA has issued a request for input (RFI) regarding Fannie Mae and Freddie Mac’s pooling practices for the formation of TBA-eligible Uniform MBS to help determine whether further action is necessary to ensure consistent security cashflows and continued fungibility of UMBS. The RFI includes a proposal for GSE pooling practices that seeks to channel the majority of the enterprises’ production into larger, multi-lender pools to ensure more uniform cashflows for TBA investors, continue to allow issuance of specified pools under appropriate circumstances and align enterprise policies around the actions to be taken when a specific seller/servicer exhibits prepayment behaviour outside acceptable norms that may adversely impact UMBS. FHFA is also seeking input on whether more aligned pooling practices would facilitate the issuance of UMBS by market participants beyond Fannie Mae and Freddie Mac. Feedback is invited by 19 December.

UK RMBS redemptions
A pair of UK RMBS are set to be redeemed this month. The RMS 26 issuer has accepted a bid for the purchase of the loans and will redeem all of the outstanding notes in full on the 14 November IPD. Additionally, the TPMF 2016-GR3 portfolio option holder currently expects to exercise its portfolio purchase option in advance of the transaction’s first optional redemption date, which falls in November.