Continued uncertainty about loan modifications are still an impediment for investors returning to the market with residential mortgage-backed securities (RMBS).  According to Jacob Gaffney, the Federal govenment’s bailout and stimulus package has “created an environment where private investors in the securitization are reluctant to come back to the sector en masse.”

Scott Sambucci earlier this week stressed the need for private banking sector to pick up the slack in mortgage origination when the federal government bows out this Spring.  Scott postulates that structured products, which “served as the foundation for many of the derivative products scorned during the 2008 banking meltdown (CDO, CLOs, etc.), ironically, might be the elixir that enables the government’s exit from the mortgage market.”

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