April 1, 2015 Newsletter
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April 1, 2015
 

SFIG News

SFIG Calendar

Advocacy Outlook

Recent Developments

Upcoming Events in Washington

 
SFIG NEWS
CFTC STAFF ISSUES NO-ACTION RELIEF APPLICABLE TO SWAPS WITH LEGACY SPVs

Yesterday, the U.S. Commodity Futures Trading Commission’s (“CFTC’s”) Division of Swap Dealer and Intermediary Oversight (“DSIO”), in response to SFIG’s request, announced that it is providing no-action relief, subject to specified conditions, to provisionally registered swap dealers (“SDs”) from compliance with certain CFTC regulations.

Specifically, "the DSIO will not recommend that the CFTC take an enforcement action against an SD for a failure to comply with the specified regulations as such regulations may apply to a legacy special purpose vehicle (“SPV”) swap, subject to the following conditions:

  1. The specified regulations apply to the SD or the legacy SPV swap solely as a result of one or more Remedial Actions taken in accordance with the applicable Delinking Criteria of one or more nationally recognized rating agencies that have rated one or more of the SPV’s obligations in response to an actual or reasonably anticipated withdrawal, qualification, and/or downgrade of the credit ratings of the original counterparty to the legacy SPV swap; and

  2. Any Remedial Action taken in accordance with the applicable Delinking Criteria does not alter the material economic terms of the legacy SPV swap."

The relief is provided for swaps with certain SPVs in existence prior to October 10, 2013.

To join SFIG's Derivatives in Securitization Task Force, please contact Amanda.Bateman@sfindustry.org.

 
 
SFIG MEETS WITH TREASURY ON HIGH QUALITY SECURITIZATIONS 

This morning, SFIG staff and members of the High Quality Securitization (“HQS”) Task Force met with officials at the U.S. Department of the Treasury to discuss the implications of recent proposals by European and international policymakers to develop an HQS framework. This was the fourth meeting related to HQS that SFIG has had with U.S. policymakers in recent weeks, including earlier meetings with the Federal Reserve Board, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation.

For questions about the meeting, please contact Sairah.Burki@sfindustry.org. Members interested in contributing to SFIG’s advocacy on HQS, including its response to the European Commission’s ongoing consultation, should contact Amanda.Bateman@sfindustry.org.

 
 
SFIG COMMENTS ON CONFORMING SAFE HARBOR REQUIREMENTS TO CREDIT RISK RETENTION RULE

On March 30th, SFIG submitted a comment letter to the Federal Deposit Insurance Corporation (“FDIC”) in response to their proposal on conforming safe harbor requirements to the final rule on Credit Risk Retention. Our letter, kindly drafted by Chapman and Cutler, requests that sponsors be allowed to early adopt the risk retention requirements for purposes of safe harbor.

If you would like to join our Risk Retention Task Force or our Risk Retention Industry Guide Working Group, please contact Alyssa.Acevedo@sfindustry.org.

 
 
SFIG MEETS WITH REGULATORS IN BEIJING AT CSF CONFERENCE

Following the conclusion of the China Securitization Forum ("CSF") conference last Thursday, SFIG members and staff had several meetings with Chinese regulatory bodies including: the People’s Bank of China, the Chinabond/Credit Asset Registration and Trading Center, and the Asset Management Association.

These Chinese regulatory meetings followed earlier ones with the China Banking Regulatory Commission and the State Administration of Foreign Exchange during the course of the conference. Meeting content was expansive and included an overview of SFIG's organization, the functions of U.S. markets and regulators, and potential application of best practices and lessons learned. Multiple action points were also identified that will serve as the basis for determining the 2015 agenda for the Chinese Market Committee.

If you are interested in joining this committee, please contact Alyssa.Acevedo@sfindustry.org.

 
 
DATE CHANGE: SPRING SYMPOSIUM MOVED TO MAY 20TH

SFIG will hold its Spring Symposium, followed by a cocktail reception, on Wednesday, May 20, 2015. The event will be hosted by Wells Fargo at their Charlotte, NC office. The symposium will focus on High Quality Securitization and derivatives, with the latter topic focused on the forthcoming margin requirements for uncleared swaps. We will distributed the full agenda and event details soon.

The event is open to both members and non-members, and is complimentary to attend. Please note, this event is closed to the press. Please click here to register. 

 
 
ONE MONTH LEFT TO SUBMIT NOMINATIONS FOR 2015 BOARD OF DIRECTORS

SFIG is accepting nominations for its Board of Directors in anticipation of the June 2015 Board rotations. Eligibility for a position is limited to individuals associated with SFIG’s primary members. Members may nominate themselves or another qualified industry participant.

SFIG’s Nominating Committee will review nomination submissions, consult with members and make recommendations to the current Board of Directors regarding proposed nominations. The Nominating Committee is dedicated to selecting a balanced Board of Directors that is reflective of the membership and the industry at large, and is committed to working hard and advancing the principles of SFIG.

Board of Director terms are for two years. Nominations for the Board of Directors will be accepted until April 30, 2015.

If you have any questions or require further clarification regarding the nominating process, please email committees@sfindustry.org.

Click here to submit your nominations. Please note that the nomination form is open to registered members only. Members that have not yet registered can do so here.

 
 
SFIG SEEKING DIRECTOR OF MORTGAGE POLICY - APPLY NOW!

This is a high profile position within the SFIG leadership team working directly with executive management, the Board of Directors, Committee Chairs and key members of SFIG’s membership. The Director of Mortgage Policy will be responsible for the development and execution of a robust mortgage securitization policy program, specifically working to further efforts to reinvigorate the private label market through SFIG’s RMBS 3.0 program and to develop comprehensive solutions and comment regarding both short and long term GSE reform. The role will also oversee member engagement and the formulation of policy positions in response to any proposed legislative or regulatory developments impacting mortgage-backed securities, including Regulation AB II.

Additional details on the Director of Mortgage Policy position may be found on the SFIG's Jobs page. Candidates interested in the position are encouraged to apply by submitting their credentials to Jobs@sfindustry.org.

 
 
SFIG CALENDAR
BIWEEKLY CREDIT CARD ISSUER COMMITTEE CALL
THURSDAY, April 2, 2015
10:00 a.m. – 11:00 a.m. (ET)
 
 
BIWEEKLY NRSRO DUE DILIGENCE INDUSTRY GUIDE WORKING GROUP CALL
THURSDAY, April 2, 2015
3:00 p.m. – 4:00 p.m. (ET)
 
 
LEGAL COUNSEL COMMITTEE CALL
MONDAY, April 6, 2015
11:00 a.m. – 12:00 p.m. (ET)
 
 
BIWEEKLY EQUIPMENT ISSUER COMMITTEE CALL
MONDAY, April 6, 2015
2:00 p.m. – 3:00 p.m. (ET)
 
 
ANDREW DAVIDSON & CO. ROUNDTABLE: SIMPLIFYING GSE REFORM
WEDNESDAY, April 8, 2015
10:00 a.m. – 4:00 p.m. (ET)
Willard InterContinental
Washington, D.C.
Richard Johns will be speaking on government guarantee and liquidity in the TBA marketplace.
Please note: This event is invitation only.
 
 
BIWEEKLY CREDIT CARD ISSUER COMMITTEE CALL
THURSDAY, April 9, 2015
10:00 a.m. – 11:00 a.m. (ET)
 
 
RESIDENTIAL MORTGAGE COMMITTEE CALL
THURSDAY, April 9, 2015
2:00 p.m. – 3:00 p.m. (ET)
 
 
WEEKLY INVESTOR COMMITTEE CALL
FRIDAY, April 10, 2015
1:30 p.m. – 2:30 p.m. (ET)
Please note: This is a closed meeting.
 
 
RMBS 3.0 REPRESENTATIONS, WARRANTIES AND REPURCHASE ENFORCEMENT WORKING GROUP IN-PERSON MEETING
WEDNESDAY, April 15, 2015
9:00 a.m. – 5:00 p.m. (ET)
Mayer Brown LLP
1221 Avenue of the Americas
New York, NY
 
 
RMBS 3.0 ROLE OF TRANSACTION PARTIES & BONDHOLDER COMMUNICATION WORKING GROUP IN-PERSON MEETING
THURSDAY, April 16, 2015
9:00 a.m. – 5:00 p.m. (ET)
Seward & Kissel LLP
One Battery Park Plaza
New York, NY
 
 
SFIG MEETING WITH THE CFTC AND PRUDENTIAL REGULATORS ON PROPOSED MARGIN RULES
TUESDAY, April 21, 2015
2:00 p.m. – 3:00 p.m. (ET)
Please note: This is a closed meeting.
 
 
2015 SFIG SPRING SYMPOSIUM
WEDNESDAY, May 20, 2015
5:00 p.m. – 8:00 p.m. (ET)
Wells Fargo
301 South College Street
Charlotte, NC 28202
The full agenda and details will be forthcoming.
To register, please click here. Please note, this event is closed to the press.
 
 
ADVOCACY OUTLOOK

If you would like to participate in the work SFIG is undertaking through our committees as highlighted below, please e-mail Committees@sfindustry.org. For specific inquiries on any of SFIG’s advocacy efforts, please contact the staff member listed for the related project.

The RMBS 3.0 Task Force released its Second Edition RMBS 3.0 Green Paper in November. Following the successful SFIG/IMN Private Label RMBS Symposium, the Task Force will continue its efforts to address key issues specific to private label mortgage securities through work streams relating to (1) Representations, Warranties, and Repurchase Enforcement; (2) Due Diligence, Data, and Loan-Level Disclosure; and (3) Role of Transaction Parties and Bondholder Communications. Presently, the Task Force is working on (1) developing a comprehensive compilation of representations and warranties for release in the spring of 2015 and (2) a grid summarizing roles of transaction parties. We encourage members to participate in any or all of the working groups to contribute towards the mission of RMBS 3.0. For additional information on RMBS 3.0, or to join the Task Force, please contact Mary.Robinson@sfindustry.org.

The GSE Reform Task Force recently met to discuss the Carney-Delaney-Himes GSE Reform bill and will update its briefing book on the legislation to support its advocacy efforts. Upon its release, SFIG provided an in-depth analysis of the bill and updated its GSE Reform Legislative Comparison, which analyzes key provisions in the five most recent housing finance reform bills including the Johnson-Crapo bill and the PATH Act. SFIG staff previously summarized members’ recommendations on the former in a briefing book, and plan to produce a similar book on the latter in the upcoming months. Additionally, the task force has been actively engaging the Federal Housing Finance Agency (“FHFA”) on several fronts, with comments submitted on its single security proposal,guarantee fee pricing and Strategic Plan for 2015-2019. To join SFIG’s GSE Reform Task Force and learn more, please contact Amanda.Bateman@sfindustry.org.

The Mortgage Loan-Level Disclosure Task Force is studying the recent Regulation AB II release of Schedule AL and comparing it to SFIG’s Schedule L submission to the Securities and Exchange Commission in February of 2014. SFIG also continues to have weekly Mortgage Industry Standards Maintenance Organization calls to go through data elements that lenders should deliver in securitizations. We will also be conducting an analysis of the data elements included in SFIG’s Schedule L submission in order to determine any privacy concerns. Please contact Alyssa.Acevedo@sfindustry.org for additional information on SFIG’s work on this topic.

The Volcker Task Force has been working with SFIG’s various asset class and legal counsel committees to identify areas within the Volcker Rule in need of clarification, particularly questions regarding covered funds and the loan securitization exemption. Please contact Amanda.Bateman@sfindustry.org to participate on the Task Force.

The Risk Retention Industry Guide Work stream is creating best practices and developing consensus positions around several areas within the Credit Risk Retention final rule. Please contact Alyssa.Acevedo@sfindustry.org with any questions.

SFIG’s Chinese Market Committee continues to hold regular calls focusing on a high-level description of SFIG’s partnership with the Chinese Securitization Forum, potential upcoming educational discussions and sharing recent market developments in China. Last week, an SFIG delegation, including one of the committee’s co-chairs, Catherine McCarihan, attended the 2015 Annual Conference of the China Securitization Forum. If you would like more information on SFIG’s work with respect to Chinese securitization, please contact Alyssa.Acevedo@sfindustry.org.

SFIG’s Shadow Banking Task Force has established the following agenda:

  • Leverage the predictive powers of the G20’s shadow banking initiative to determine future SFIG advocacy initiatives;
  • Assess the level of regulation to which our members are already subject;
  • Measure the full impact of those regulations on lending decisions and business models; and
  • Provide input into IOSCO, BCBS and IAIS on the revitalization of securitization markets.

The Task Force will have its first full meeting in the coming weeks, and members from across asset classes are encouraged to participate. To register your interest in SFIG’s Shadow Banking Initiative, please contact Amanda.Bateman@sfindustry.org.

The Regulation AB II Task Force will focus on the disclosure and offering process requirements within the final rule. Two work streams have been formed to develop a comment letter on the proposed rules that remain outstanding and to produce an industry guide for critical elements of the final rule. SFIG members who are interested in joining this task force or asset specific committees should contact Alyssa.Acevedo@sfindustry.org.

The Regulatory Capital and Liquidity Committee is addressing industry concerns related to the Federal Reserve Board’s Final Rule on the Liquidity Coverage Ratio (“LCR”). This committee will also develop a comment letter when U.S. regulators release their proposed Net Stable Funding Ratio (“NSFR”). To become involved in SFIG’s advocacy on the Final LCR rule or NSFR, please contact Alyssa.Acevedo@sfindustry.org.

The Derivatives in Securitization Task Force recently obtained no-action relief from the CFTC giving swap dealers comfort that the CFTC would not take enforcement action against swap dealers that did not comply with certain CFTC Regulations when taking actions in response to the credit ratings downgrade of a counterparty to a legacy swap. The relief applies to swaps with SPVs that were in existence prior to October 10, 2013. The Task Force also recently commented on the CFTC’s proposal on margin requirements for uncleared swaps, as well as the prudential regulators’ proposal regarding margin and capital requirements for covered swap entities. SFIG also submitted a comment letter at the end of June 2014, advocating for asset-backed securities issuers to qualify for the “low-risk financial end user” designation proposed by prudential regulators in the original proposal. SFIG members who are interested in learning more about this initiative should email Amanda.Bateman@sfindustry.org.

The NRSRO Due Diligence Industry Guide Work stream is continuing to review the due diligence elements of the Final Rules on NRSROs. The working group meets biweekly on Thursdays at 3:00 p.m. (ET) and members interested in learning more should contact Amanda.Bateman@sfindustry.org.

The Money Market Fund Reform Working Group submitted a comment letter on October 13, 2014 regarding the Securities and Exchange Commission’s July 23, 2014 proposal which includes, among other things, possibly amending rule 2a-7’s issuer diversification provisions to eliminate an exclusion that is currently available for securities subject to a guarantee issued by a non-controlled person. SFIG also submitted a comment letter in September 2013 on Money Market Fund Reform. If you are interested in joining this working group, please contact Alyssa.Acevedo@sfindustry.org.

The High Quality Securitization Task Force submitted a response to the BCBS-IOSCO consultation on its criteria for identifying simple, transparent and comparable securitizations. SFIG’s comments were built off of those sent to the European Banking Authority on January 14th (available here) regarding its proposed criteria and to the European Central Bank and Bank of England last summer (available here) regarding the development of a sustainable securitization market in Europe. The HQS Task Force is currently developing a response to the European Commission’s related proposal, announced in conjunction with its plans for a capital markets union. To join the High Quality Securitization Task Force, please contact Amanda.Bateman@sfindustry.org.

 
 
INDUSTRY NEWS HIGHLIGHTS
ECB, BOE COMMENT ON THE EUROPEAN COMMISSION’S PROPOSED FRAMEWORK FOR HIGH QUALITY SECURITIZATIONS

On March 27th, the European Central Bank (“ECB”) and the Bank of England (“BOE”) published their joint comments in response to the European Commission's ("EC's") consultation on simple, transparent and standardized (“STS”) securitizations. The central banks point to various efforts underway to develop a high quality securitization (“HQS”) framework and advocate for the development of a uniform set of criteria which, they state, closely aligns with the EC’s goal of creating a Capital Markets Union to help kick-start the E.U. economy.

The ECB and BOE propose using the criteria developed by the Basel Committee on Banking Supervision (“BCBS”) and International Organization of Security Commissions (“IOSCO”) as the basis for such framework, with certain enhancements incorporated based on responses to the BCBS/IOSCO consultation and an earlier one undertaken by the European Banking Authority (“EBA”). Implementation and enforcement of the STS criteria should entail an appropriate balance between reliance on firms to ensure compliance—which notably would include self-attestation by the securitizer “based on an appropriate level of assurance”—and supervisory oversight. Additionally, the ECB and BOE argue that consideration should be given to the appropriate treatment of asset-backed commercial paper (“ABCP”), which has thus far been excluded from HQS proposals. Importantly, the central banks note their support for granting “appropriate prudential recognition” to STS securitizations by incorporating the criteria into the BCBS’ revised securitization framework, finalized in December, and E.U. risk retention requirements.

SFIG submitted comments to the BCBS-IOSCO and EBA on their proposed criteria for HQS as well as to the ECB-BOE in response to their May 2014 discussion paper on stimulating capital markets in Europe. Many of the points advocated by the ECB-BOE in their comment letter on the EC proposal were also advocated by SFIG in those comment letters, including self-attestation, consideration of ABCP and regulatory capital relief for HQS. The HQS Task Force is currently formulating its comments, which are due May 13th, on the EC proposal as well. To join the Task Force and engage in this effort, please contact Amanda.Bateman@sfindustry.org.

 
 
SHELBY SIGNALS GSE REFORM UNLIKELY THIS YEAR

Senator Richard Shelby (R-AL), Chairman of the Senate Committee on Banking, Housing, & Urban Affairs (“Committee”), stated that he would rather leave Fannie Mae and Freddie Mac (“GSEs”) in conservatorship than pass a bill that includes explicit government support for the housing market, according to an article in National Mortgage News.

Of importance to SFIG members, Chairman Shelby also said he opposes replacing the GSEs with a system that would include a government guarantee for mortgages. “I don’t know if we would do anything in the areas of Fannie Mae and Freddie Mac. We’ll see what’s doable. I don’t want to do something to make it worse than it is,” stated Shelby.

As SFIG stated in testimony before the Committee, limiting the government’s involvement in the market by changing or ending the current infrastructure must account for the critical contribution that rates investors make to the GSE market. Therefore, SFIG believes that retention of a catastrophic-loss government backstop is essential to any housing finance reform efforts, as the to-be-announced market and the rates market for mortgage-backed securities cannot function without such a guarantee.

To view SFIG’s latest efforts on GSE reform, please click here. To view SFIG’s side-by-side comparison of major GSE legislation, please click here.

 
 
FHFA DIRECTOR WATT CHARTS TRICKY MIDDLE PATH THROUGH HOUSING MARKET IN LIMBO

Federal Housing Finance Association (“FHFA”) Director Melvin Watt will not dictate what ultimately happens to the government sponsored enterprises (“GSEs”), which is a mandate for Congress to address, according to an article in the American Banker. However, his moves will shape what Congress decides. For those who would like for GSEs to be taken out of the equation entirely, Watt's efforts to ease credit standards and spur new lending could be seen as shortsighted, according to the article.

"FHFA is focused on how we manage the present," Watt said at his first public speech last May. "We have reformulated this goal [to reduce the GSEs] so that it no longer involves specific steps to contract the enterprises' market presence, which could have an adverse impact on liquidity. Instead, the 'reduce' goal focuses on ways to scale back Fannie Mae and Freddie Mac's overall risk exposure. This approach allows us to meet our mandates of upholding safety and soundness and ensuring broad market liquidity."

Republican lawmakers and other critics argue that Watt's policies, particularly a plan allowing the GSEs to buy mortgages with down payments as low as 3 percent, would put even more risk on the books. The FHFA is also involved in a number of long-term projects, like creating a single security for the two GSEs. Furthermore, the agency has spent more than a year deciding whether to adjust guarantee fees. 

Click here to view SFIG’s response to the FHFA’s request for input on its Single Security Initiative. To view SFIG’s response to the FHFA’s strategic plan, click here.  

 
 
OCC REPORTS IMPROVED MORTGAGE PERFORMANCE DURING FOURTH QUARTER OF 2014

The performance of first-lien mortgages improved in the fourth quarter of 2014, according to the Office of the Comptroller of the Currency’s (“OCC”) Mortgage Metrics Report, Fourth Quarter 2014. The report showed that 93.2 percent of mortgages included in the report were current and performing at the end of the quarter, compared with 93.0 percent at the end of the previous quarter.

There was a 9.4 percent decrease in the number of mortgages 30 to 59 days past due. Seriously delinquent mortgages which are 60 or more days past due or held by bankrupt borrowers whose payments are 30 days or more past due were down by 12.2 percent from last year.

Foreclosure activity among reporting servicers also experienced a decline. The number of mortgages in the process of foreclosure at the end of the fourth quarter of 2014 decreased by 39.7 percent from a year earlier.

Also in the fourth quarter of 2014, more than 88 percent of mortgage modifications reduced monthly principal and interest payments; 52.2 percent of modifications reduced payments by 20 percent or more (by an average of $243 per month).

 
 
UPCOMING EVENTS IN WASHINGTON
CFTC MARKET RISK ADVISORY COMMITTEE ("MRAC") PUBLIC MEETING

THURSDAY, April 2, 2015
10:00 a.m. – 1:30 p.m. (ET)
CFTC Headquarters lobby-level Hearing Room
1155 21st St, NW, Washington, DC 20581

The MRAC will discuss issues related to: current risk management techniques employed by Derivatives Clearing Organizations to ensure that the appropriate measures are in place to address the potential default of a significant clearing member; and the evolving structure of the derivatives markets, particularly with respect to Swap Execution Facilities.

 
 
SEC INVESTOR ADVISORY QUARTERLY MEETING
THURSDAY, April 9, 2015
9:30 a.m. – 3:30 p.m. (ET)
SEC Headquarters, Multipurpose Room,
100 F Street, NE, Washington, DC 20549
Agenda available here.
 
 
SFIG COMMITTEES AND TASK FORCES

SFIG has a number of Committees and Task Forces meeting and working on many topics of interest to the securitization industry. Please email us for more information, including how to join.

SFIG is pleased to share this edition of its newsletter with our members, as well as our supporters in the structured finance community. To ensure that you receive future editions of the newsletter, please visit our website or email us to learn more about membership opportunities.

Contact Information

Richard Johns Executive Director

Kristi Leo Investor Relations

Sairah Burki Director of ABS Policy

Michael Flood Director of Advocacy

Mary Robinson Policy Manager

Alyssa Acevedo Policy Analyst

Amanda Bateman Policy Analyst

Daniel Tees Policy Analyst

Jennifer Serpas Office Manager

Allison Creswell Executive Administration

1775 Pennsylvania Ave. NW
Suite 625
Washington, DC 20006

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