Kroll Bond Rating Agency

This week, we're seeing more evidence that home equity is playing a bigger role across the mortgage market.

New data shows demand continuing to concentrate around home equity products, while KBRA says the second lien securitization market has grown to more than $34 billion.

Inside, reverse proprietary products are continuing to gain ground.

Meanwhile, housing inventory is improving, but demand remains soft.

New research from Kroll Bond Rating Agency found that second lien RMBS Outstanding has grown from just $375 million across four deals in April 2023 to to $34.2 billion across 140 deals by July 2026.

That includes both HELOCs and closed end-to-second mortgages.

KBRA now considers second lien securitization a reoccurring part of the private label RMBS market after years of relatively limited activity.

So from both the consumer demand side and the capital markets side, there's more evidence building around the broader home equity shift.

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when you hear, "Rest in peace, top six," you know you're listening to KBRA AM-

Yeah

... and KBR FM San Francisco, the sports leader, Cumulus Media station.

The Franklin consists of two connected office towers totaling 2.5 million square feet, the 60-story building at 227 West Monroe Street, and the 34-story building at 222 West Adams Street, connected by an atrium that was recently renovated.

The property generated $46.98 million of net cash flow during the 12 months through June, according to KBRA.

The bigger takeaway is that the deal shows the CMBS market remains open for large, well-located office properties with strong leasing momentum.

The new loan also gives Tishman Spire fresh capital for leasing while resolving a portion of the debt that came due from the property's original $832 million financing package.

So that's illustrating both sort of like operational problems and credit quality problems.

And then KBRA, the Cruel Bond Rating Agency, has downgraded multiple lending point securitizations that were not performing as initially expected.

So also indicating credit quality.

As I sort of alluded to at the beginning, you know, this is like hardly the first fintech induced headache or loss we've seen for a partner bank.

I mean, I think from the lending point side, I feel like I have a... a pretty good understanding or a pretty good thesis, which which you basically said or alluded to, which is basically a lack of other options.

Right.

So I mentioned Kroll KBRA downrating prior securitizations.

I will also caveat or asterisk that like I am not a deep in the weeds capital markets

Welcome, market participants, to another Three Things in Credit.

I'm Van Hesser, Chief Market Strategist at KBRA.

Each week, we bring you three things impacting credit markets that we think you should know about.

So this is the week of NVIDIA earnings, and our good friend Rob Schiffman over at Bloomberg Intelligence described the event this way, and I quote, from the equity perspective, this may be the best print in the history of the stock market and the best forward guide in history, unquote.

The story is settling down.

As always, thanks for joining.

Don't forget to check in on KBRA.com for our ratings reports and our latest research, including our U.S. and U.K. European forward looks.

We'll see you after the U.S. holiday for what I'm sure will be a rollicking Q4.

We'll also look at German pension reforms, which could provide support to European capital markets in both the near term and over the longer run.

And lastly, I'll give you a quick summary of our quarterly forward look report, which you can find in full on KBRA.com. All right, let's dig in.

This week, we're spending quite a bit of time on Germany.

For starters, let's look at the economic growth that's beginning to emerge.

Credit spreads remain at historically tight levels, despite moving off their lows, leaving comparatively little valuation cushion should the macroeconomic outlook deteriorate.

Against this backdrop, our analysis focuses on the relative resilience of shorter duration and higher quality credit, while monitoring whether improving investment, earnings and economic activity can develop into a more durable European growth cycle.

Head to KBRA.com to read the European and UK report, as well as my colleague Van Hesser's US perspective.

And of course, watch out for our video discussion on the topic to be published shortly.

They went through the traditional Wall Street gatekeepers.

They secured a BBB investment grade rating from KBRA, which is a major rating agency.

Yep.

And they ran the entire deal through Piper Sandler, a very traditional investment bank.

Right.

And securing a BBB rating from an agency like KBRA is incredibly significant.

Because it's investment grade.

Yes, that is the literal definition of investment grade.

He teased it a little bit in the open, Jeff, which is Ripple has closed an upsized $275 million private placement of senior unsecured notes issued by Ripple Prime, its non-bank prime brokerage, to fund working capital and expansion of its US business.

The offering received, uh, better business, uh, BBB investment, Better Business Bureau investment-grade rating from KBRA, as well as Ripple Prime looks to expand asset clearing.

Again, that's just more capital to work with there.

Jeff, you gotta love this dude right here.