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May 24, 2019  

UBS Testing the Waters for MBS Comeback

In a stark reversal of its post-credit-crisis aversion to securitization, UBS is attempting to reassemble a team that would underwrite and issue private-label mortgage bonds.

However, a lack of available senior-level personnel appears to be slowing the effort.

UBS’ potential reemergence in the market comes as something of a surprise, considering that the bank swore off most securitization-related activities in late 2011. But the bank’s huge crisis-era writedowns are well in the past, and the institution has mostly resolved a barrage of lawsuits over its involvement in bringing ill-fated mortgage bonds to market prior to the crash.

The upshot: UBS believes the time is right to pursue opportunities that are emerging with growth in the mortgage-finance industry.

What’s known at this point is that UBS is looking for New York-based professionals to assemble deals backed by all types of home loans in the U.S., including those that don’t meet the Consumer Financial Protection Bureau’s “qualified-mortgage” standards. At the same time, there are indications that the bank may be having trouble building a staff.

The apparent lack of progress would reflect a situation in which many mortgage-finance professionals either left the business or moved to buy-side roles after the market crash as banks including UBS reduced their activities. With some major institutions already having rebuilt, meanwhile, those seeking to enter the market or expand today are finding a shortage of talent — especially when it comes to filling leadership positions.

Many investment shops and law firms are having similar experiences. “There’s a severe shortage of high-level talent to run these programs and do these deals, and it has become a sore point for many investment banks looking to get back into the mortgage-bond business,” one source said.

Those with money to spend still can find the occasional executive with pre-crisis experience. Morgan Stanley, for example, just lured warehouse-finance specialist Darius Houseal away from J.P. Morgan with a handsome compensation package (see article on Page 5).

Others are taking less conventional approaches. Sources said banks are talking about commissioning a new unit of loan-review firm Digital Risk to handle some or all of their securitization-structuring functions.

That operation, still in the early stages, is led by Digital Risk’s head of due-diligence services, Sadie Gurley. She arrived in 2017 from mortgage lender Eave, following a series of buy-side and trading roles.

As for UBS, the bank served as a bookrunner on 363 mortgage-related securitizations totaling $272.1 billion from 2003 until it pulled the plug in 2011. As an issuer, it completed 208 deals for $120.2 billion from 2001 to 2008, according to Asset-Backed Alert’s ABS Database.