Is Student Loan ABS really making a comeback?

Total Securitization ran an article last week citing some renewed optimism from several bankers, traders and issuers in the student loan abs market.  The remarks were gathered at the recent ABS East Conference held in Miami and those interviewed noted a year-over-year improvement in issuance levels with the prospect of nearly $50 billion in the issuance pipeline.

Does anyone really believe this?  Only $15 Billion has been issued through the conference dates in October.  Let’s allow for some optimism and suggest that the market might reach $25 Billion in new issuance by year-end.  Our analysis is no more scientific than the $50 Billion projected in the article; perhaps just a bit more realistic with less than 3 months to go in 2010.

The optimism and enthusiasm expressed by these industry participants probably does more harm than good.  One industry source in the article did key in on the “handicap” the industry has faced over the last several years, dating back even before the 2007 meltdown from the aggressive “regulatorization” of the private market, that shows no signs of letting up.

What these rosy commentaries do create, however, is a perception among regulators and law makers that the remedies and restrictions they have prescribed are “just the right amount”.  We are guessing that most abs bankers, issuers and investors, when asked to be totally honest, would not project anything less than a minimal recovery in the markets for the next several years.

While we understand that it may be easier on the ego to sound optimistic, we are left wondering if a little more honesty wouldn’t speed up a realistic assessment of the new rules and regulations in search of a more reasonable environment for the private student loan market and the return of securitization in this asset class as an attractive method for joining issuers and investors.

About markferraris
Managing Principal Orchard Street Partners LLC

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