Wall Street Watch: S&P Predicts Slower Growth for Loan-Backed Securities
Brockman, Joshua, American Banker
Analysts at Standard & Poor's are cautioning that changes on the horizon may alter the near-perfect conditions in the residential mortgage- backed securities market.
Despite a strong U.S. economy, attractive interest rates, and high levels of consumer confidence which have thrust the residential mortgage- backed securities market to record volumes this year, Standard & Poor's analysts presented a conservative forecast last week.
This year has been profitable for originators and investors, and some market participants remain optimistic that rates will stay where they are or move even lower, yielding increased mortgage volume.
In June, Standard & Poor's rated 64 deals totaling almost $24.5 billion of securities - the largest month in years - said Terry Osterweil, director of structured finance ratings at Standard & Poor's.
But the rating agency predicts that rising interest rates and a softening of the economy over the next year that will lead to slower growth rates in 1999 than in either of the past two years.
The sector has enjoyed 10-year highs in housing sales and starts and a home ownership rate close to 66%, but S&P said that three economic clouds were looming: Asia, inflation, and the possibility of corrections in financial markets, particularly the U.S. stock market.
Though the ratings agency expects a stream of refinancings and mortgages to continue at a "pretty steady clip," Mr. …