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March 31, 2017  

Morgan Stanley Chases Risk-Transfer Gigs

Morgan Stanley has hired a bond-structuring specialist to help it gain a presence as an underwriter of risk-transfer deals from Fannie Mae and Freddie Mac.

Trevor Moffitt had been playing a lead role in arranging such transactions at Barclays, which racked up $5.9 billion of bookrunning assignments in the asset class since his arrival in 2013. Most recently, he supervised the structuring of a $639.9 million deal that Freddie priced via its Freddie Mac Whole Loan Securities Trust on March 9.

Moffitt is expected to start in Morgan Stanley’s New York office after waiting out a three-month gardening leave, assuming a similar post in which his initial tasks will include convincing Fannie and Freddie that the bank should have a spot in their underwriting rotations.

When it comes to distribution, Rebecca Hogan Dorrian already has been overseeing trading of risk-transfer bonds for a few months. Dorrian most recently was in a securitization-focused sales role, but earlier held positions including head of trading for all U.S. structured products. She has been on board at Morgan Stanley since 2000.

Sources said Dorrian’s assignment reflects a recognition on the bank’s part that its ability to become a bookrunner of risk-transfer deals would be enhanced by a market-making presence. That would include keeping Fannie and Freddie bonds in inventory, and possibly offering other forms of financing. “Fannie and Freddie want their underwriters to provide a lot of support for their deals in the secondary market. That is something Morgan Stanley hasn’t been willing to do before,” one source said.

The effort actually marks Morgan Stanley’s second push into the market for risk-transfer bonds. The bank ran the books on $1.3 billion of the mortgage-linked transactions in 2014 — working on behalf of both Fannie and Freddie — and added $535 million of league-table credit in 2015. But it hasn’t led such an offering since then, in part because of company-wide layoffs.

Moffitt’s time at Barclays was preceded by a stop at Credit Suisse, where he worked on a mix of structured-product transactions. It’s unclear how Barclays will respond to his exit, although the bank is believed to have a number of personnel who specialize in risk-transfer deals.

Moffitt’s hiring comes at a time when Morgan Stanley has been seeking a greater underwriting and market-making presence for its securitization unit overall, while only gradually adding senior members to the team. Among the few upper-level personnel to join the unit in recent months was head U.S. asset-backed bond trader David Bell, who arrived in September from Deutsche Bank.

Fannie and Freddie together have issued $5 billion of risk-transfer bonds this year, paying their underwriters a combined $17.1 million of fees. Last year, they produced $14.3 billion of such transactions, according to Asset-Backed Alert’s ABS Database.

Among bookrunners, Bank of America is leading the way so far this year with $1.1 billion of league-table credit. J.P. Morgan is next at $1 billion, followed by Barclays at $720 million. The newsletter counts only the non-guaranteed portions of the offerings, in which the reference loans remain on the issuers’ books. For deals with more than one bookrunner, league-table credit is split equally among the banks named in offering documents.