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Taking the Bait

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60 | Th e M Rep o RT O r i g i nat i O n s e r v i c i n g SECONDARY MARKET a na ly t i c s the latest s e c O n da r y m a r k e t report: Obama to tap san antonio mayor for HUd a s originally reported by the New York Times, President Obama is expected to nominate current San Antonio Mayor Julián Castro as the new HUD secretary. Castro would take the place of current direc- tor Shaun Donovan, who is to become director of the Office of Management and Budget. Castro originally garnered national attention as the key- note speaker at the Democratic National Convention in 2012. Politically, the Democrats are betting heavily on appealing to the country's growing Hispanic community. Castro has been mentioned often as a potential vice-presidential candidate in 2016. This is the second overture the White House has made to the San Antonio mayor. After the 2012 election, the president asked Castro to be his transportation secre- tary. Castro opted to stay in San Antonio, citing his desire to finish his tenure as the city's mayor. When asked last month if the thought he could be wasting an opportunity, Castro said, "I'm going to be 40 this year. I feel like I have a decent amount of time either way. Whatever happens in the next two years to eight years, I'll have time." The Times cited people famil- iar with the matter who advised Castro to up his profile in hopes of garnering national attention in the next presidential election. "Some of Mr. Castro's allies also believe that with income inequal- ity becoming a focal point for Democrats, the HUD job offers the mayor an opportunity to burnish his credentials on issues of poverty and to raise his appeal among those on the party's left. The post will also let him develop relationships with and win favors from city leaders and activists in a way he cannot on the Democratic lecture circuit," the Times said. Gearing up for the presiden- tial election in 2016, its largely believed that the ever-increasing demographic of Hispanic voters will push both political parties towards Hispanic running mates. "A couple years ago, I said Republicans should enjoy it because it's not going to get any better for them," Castro said, "and it's only getting better for Democrats moving forward." report Finds Flaws in analysis of rmBs deal Fitch says S&p erred in evaluating the first post-crash re-performing transaction. s tandard & Poor's (S&P) may have made some missteps in evaluating the risk of a residen- tial mortgage-backed security (RMBS) transaction that has now been postponed, Fitch Ratings says in a recent report. In a release, Fitch says S&P relied on incomplete home value data for loans contained in the recently announced RMBS transaction to be issued by Bayview Asset Management. "Specifically," Fitch said, "S&P elected to disregard the values derived from broker price opinions (BPOs) in lieu of original valuations adjusted for regional market value declines." Including the BPO values, the ratings agency says the average loan-to-value ratio (LTV) of the transaction would be 145 percent compared to the 90 percent LTV S&P found in its own examination—putting the mortgages deeply underwater as opposed to simply under-equitied. Applying its own loss criteria for similar collateral, Fitch says the higher LTVs would result in a 20 percent increase in projected default probably and a 30 percent increase in projected loss severity. Fitch's second look is particularly pertinent, considering the transaction— labeled "Bayview Opportunity Master Fund IIIa Trust 2014- 9RPL"—was to be the first publicly rated RMBS sale involving formerly delinquent loans since last decade's crisis. "Fitch believes that ignoring the BPO values dramatically increases the likelihood of underestimating potential loss severities and results in insufficient credit enhancement," the firm said in its report. "Fitch has found that for distressed or re-performing loans, updated BPO valuations often indicate a value lower than an indexed property value due to some adverse selection of the properties." The transaction, valued at $184.9 million, was postponed by Bayview following S&P's request for more information about the mortgage pool. FHFa Official charged with threatening ex-director The agency's Coo reportedly threatened to shoot DeMarco. a top official for the Federal Housing Fi- nance Agency (FHFA) is looking at a felony charge for allegedly threatening the agency's former acting direc- tor, Edward DeMarco. According to a case sum- mary from the District of Columbia Courts website, Richard Hornsby, FHFA's COO, was charged in late April with "[threatening] to kidnap or injure a person," resulting in an order for him to stay away from DeMarco. He has also reportedly been directed to keep away from the agency, according to the Wall Street Journal, which first broke the story. Citing police and court records, the Journal reported: "Mr. Hornsby allegedly threat- ened to shoot Mr. DeMarco after making 'increasing threaten- ing comments' about him over the course of several weeks ... FHFA officials notified the agency's inspector general about the threats on April 28, after an incident in which Mr. DeMarco was 'escorted to a secure location following a report of a threat.'" The Journal report goes on to say that employees were notified following the incident that Hornsby had been placed on leave and will replaced for the time being by Eric Stein, a former Treasury official brought on as a special adviser to FHFA director Mel Watt earlier this year. DeMarco announced in late March his intent to depart FHFA at the end of April after serving more than four years as the agency's acting director and several months as senior deputy director. He was replaced in January by Watt, a former con- gressman from North Carolina.

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