The buzz at a recent asset-backed conference was how the popularity of less traditional mortgages amid softening appreciation will impact the securities market.
Some attendees of the ABS West conference held in Phoenix last week expressed strong feelings that the mortgage market has been too eager to extend credit to home owners, according to an announcement by conference provider Information Management Network.
Last year, there was an upturn in the percentage of mortgage-backed securities -- currently about 80% of the ABS market share -- and large pools of these now consist of "affordability products" such as 40-year term, interest-only and adjustable-rate mortgages, and negative amortization products.
"We are beginning to see prudent home mortgage deal terms and conditions being replaced by more liberal structures, which we see as a classic sign of sowing problem seeds for the future," MBIA Managing Director Mark Zucker reportedly said at the conference's opening session.
Many who expressed concern, however, did point out the continued liquidity into the MBS marketplace, the persistence of demand from borrowers, and the low default rates that has given confidence to lenders, Information Management reported.
"Lenders are currently using better credit evaluation tools than we have ever had," said William Haley, ABN AMRO Inc. managing director. "I'm not overly concerned that option ARMs and 'interest only' loans will sink the subprime market."
Overall, most attendees of the four-day conference, which had over 90 panels featuring 400 industry leaders, were in agreement that 2006 should prove benign for mortgage-backed securities investors, the New York conference provider said.