S&P: Private RMBS Issuance May Hit $1 Trillion

Issuance of U.S. private-label residential mortgage-backed securities could reach $1 trillion this year, according to Standard & Poor's Ratings Services.The rising issuance is being driven by numerous factors, including low interest rates, rising home prices, innovative lenders, favorable demographic factors, and "insatiable" borrowers, the rating agency said. "The current run of unprecedented issuance began in 2001, with $267 billion, a record at the time, and continued unabated with $414 billion in 2002, $586 billion in 2003, $865 billion in 2004, and already $536 billion in the first half of 2005," S&P reported. Private-label issuance eclipsed that of the agency markets for the first time in the fourth quarter of 2004, and it has continued, according to the rating agency. "Contributing to the decline in agency issuance since 2003 has been a movement from conventional, fixed-rate loans, toward more innovative loan types popular with today's highly leveraged borrowers," S&P said. "The attraction of 'affordability products,' whose main purpose is to reduce the monthly payment owed by the borrower in the first few years of a loan's life, has kept production levels high." S&P can be found online at http://www.standardandpoors.com.