As other markets have recovered since the recession, asset-backed securities remain mired in a hard liquidity squeeze, writes Faith Schwartz of CoreLogic. The only sign of life is when issuers are willing to take on some credit risk transfer.
No one wants the bad old days of subprime ABS to return. But a functional non-agency residential mortgage-backed security market is an essential step toward a market not absolutely dominated by the federal mortgage agencies.
Schwartz writes that part of the problem is too much regulation.
Recent testimony to Congress from Structured Finance Industry Group before the House Subcommittee on Capital Markets and Government Sponsored Enterprises just underlines how squeezed the industry feels.
Liquidity will continue to suffer from a spate of overzealous regulations, said a spokesman for the group, and “pose a serious threat to securitization as a critical source of funding for the real economy.”