April 29, 2015 Newsletter
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April 29, 2015
 

SFIG News

SFIG Calendar

Advocacy Outlook

Industry News Highlights

Upcoming Events in Washington

 
SFIG NEWS
ONE DAY LEFT TO SUBMIT YOUR BOARD OF DIRECTORS NOMINATIONS

Tomorrow, Thursday, April 30th, is the last day to submit your nominations for candidates for the SFIG Board of Directors 2015 election. The nomination process will close at the end of business.

As a reminder, eligibility for these positions is limited to individuals associated with SFIG’s primary members. Members may nominate themselves or another qualified industry participant. For multiple nominations, please fill out a form for each submission. Board of Director terms are for two years.

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

If you have any questions or require any clarification around the nominating process, please email info@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.

 
 
EMINENT DOMAIN ADDRESSED IN FY 2016 APPROPRIATIONS BILL

On April 29th, the House Appropriations Subcommittee on Transportation, Housing and Urban Development (“THUD”) passed the THUD fiscal year ("FY") 2016 funding bill by voice vote. The bill includes a provision that would prevent the Federal Housing Administration, Government National Mortgage Administration or Department of Housing and Urban Development from facilitating the use of eminent domain. As set forth in Section 229 of the bill, the agencies are prohibited from using funds to “insure, securitize, or establish a Federal guarantee of any mortgage or mortgage backed security that refinances or otherwise replaces a mortgage that has been subject to eminent domain condemnation or seizure, by a state, municipality, or any other political subdivision of a state.” This provision is a continuation of a similar bill signed into law by President Obama for the FY 2015 appropriations bill, that SFIG previously supported.

SFIG has consistently opposed the use of eminent domain to seize securitized mortgage loans for the purposes of modification, and signed a joint trade association letter endorsing the inclusion of Section 229 in the FY 2016 THUD Bill. SFIG also filed an amicus curiae brief on August 30, 2013, in support of a preliminary injunction against the City of Richmond, California and Mortgage Resolution Partners LLC ("MRP"), arguing that efforts by Richmond and MRP to seize loans held in securitized trusts is unconstitutional and could cause permanent damage to the U.S. home mortgage system. For a detailed overview of SFIG’s policy on eminent domain, please see our Eminent Domain Position Paper.

The bill will now move to the House Appropriations Committee for consideration.

 
 
SFIG CALENDAR
CREDIT CARD ISSUER COMMITTEE CALL
THURSDAY, April 30, 2015
10:00 a.m. – 11:00 a.m. (ET)
 
 
NRSRO DUE DILIGENCE INDUSTRY GUIDE CALL
THURSDAY, April 30, 2015
3:00 p.m. – 4:00 p.m. (ET)
 
 
REGULATORY CAPITAL AND LIQUIDITY COMMITTEE CALL ON HQS
THURSDAY, April 30, 2015
4:00 p.m. – 5:00 p.m. (ET)
 
 
IMN’s SUNSHINE BACKED BONDS CONFERENCE
THURSDAY, April 30, 2015 - FRIDAY, May 1, 2015
Registration available here

Sairah Burki will be speaking on the “Pre-Conference Workshop I: A Securitization Market Primer” panel.
 
 
MONTHLY LEGAL COUNSEL COMMITTEE CALL
MONDAY, May 4, 2015
11:00 a.m. – 12:00 p.m. (ET)
 
 
BIWEEKLY EQUIPMENT ISSUER COMMITTEE CALL
MONDAY, May 4, 2015
2:00 p.m. – 3:00 p.m. (ET)
 
 
HIGH QUALITY SECURITIZATION TASK FORCE CALL ON EC CONSULTATION
TUESDAY, May 5, 2015
10:00 a.m. – 11:00 a.m. (ET)
 
 
BIWEEKLY RISK RETENTION INDUSTRY GUIDE CALL
TUESDAY, May 5, 2015
11:00 a.m. – 12:00 p.m. (ET)
 
 
CHINESE MARKET COMMITTEE CALL
THURSDAY, May 7, 2015
9:00 a.m. – 10:00 a.m. (ET)
 
 
BIWEEKLY NRSRO DUE DILIGENCE INDUSTRY GUIDE CALL
THURSDAY, May 14, 2015
3:00 p.m. – 4:00 p.m. (ET)
 
 
IMN’s GLOBAL ABS 2015 CONFERENCE
TUESDAY, June 16, 2015 – THURSDAY, June 18, 2015
The Barcelona International Convention Centre
Barcelona, Spain
Registration is available here.
 
 
IMN’s ABS EAST CONFERENCE
WEDNESDAY, September 16, 2015 – FRIDAY, September 18, 2015
The Fontainebleau
Miami Beach, FL
Registration is available here.
 
 
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 developing a comprehensive compilation of representations and warranties for release in the spring of 2015 and 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 has updated its briefing book on the legislation to support its advocacy efforts. With the release of the bill, SFIG staff also 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 will hold its next call on Thursday, May 7th 2015 at 9:00 a.m. (ET). These calls continue to focus on a high-level description of SFIG’s partnership with the Chinese Securitization Forum, potential upcoming educational discussions and the sharing of recent market developments in China. An SFIG delegation, including one of the committee’s co-chairs, Catherine McCarihan, attended the recent Chinese Securitization Forum conference. 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 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 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 acomment 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. Comments are due by May 13, 2015. To join the High Quality Securitization Task Force, please contact Amanda.Bateman@sfindustry.org.

 
 
INDUSTRY NEWS HIGHLIGHTS
EC REPORTEDLY REJECTS CALLS FOR ISSUER SELF-CERTIFICATION OF HQS DEALS

As reported by SFIG on April 1st, the European Central Bank and Bank of England included in their comments to the European Commission (“EC”) a recommendation that ABS issuers should be able to certify, with some supervisory oversight, that their deals are high quality. SFIG welcomed the comments, as self-certification was also recommended in our own comment letters on high quality securitization ("HQS"). However, according to a recent article in Reuters, the EC is unlikely to adopt such an approach, as not having an external supervisor or certifier could damage efforts to rebuild trust in the European market, which is still suffering from the stigma of the global financial crisis.

As one official explained, "A system based fully on self-certification may fail to give sufficient confidence to the investor community… It's important that we don't rely only on one party." European regulators have emphasized the need to restore investor confidence in ABS in order to stimulate capital markets post-crisis. The EC is currently contemplating ways to make the criteria operational and easy to comprehend by investors, who are encouraged to do their own analyses of the deals.

Comments are due to the EC on May 13th. SFIG will be submitting a response to the consultation, and members interested in contributing to that work should email Amanda.Bateman@sfindustry.org

 
 
CHINESE ABS MARKET EXPECTED TO VASTLY EXPAND

Issuance of Chinese ABS could triple to more than $160 billion this year, according to a recent Reuters article. "This expansion would reactivate huge assets that have been mouldering on bank books, as Beijing streamlines procedures for firms to securitize receivables."

Earlier this month, the People’s Bank of China announced that monthly regulatory approval will no longer be required for ABS issuance. According to Reuters, encouraging banks to lend more is a major policy goal for Chinese officials with Premier Li Keqiang calling for banks to "activate existing assets."

Reuters states that market players are now expecting ABS issuance to more than triple to 1 trillion yuan ($161 billion) this year, up from 300 billion yuan ($48 billion) in 2014, which was in turn twice the total amount issued from 2005 to 2014.

To join SFIG’s Chinese Market Committee, please contact Alyssa.Acevedo@sfindustry.org.

 
 
FHFA MOVING AHEAD WITH CAPITAL STANDARDS FOR GSE SERVICERS

The Federal Housing Finance Agency (“FHFA”) is moving quickly to finalize proposed financial requirements for nonbank firms that service Fannie Mae and Freddie Mac (“GSE”), according to a National Mortgage News article.

"FHFA is collecting extensive feedback on the proposed guidelines and we expect to finalize these requirements in the next month or so," FHFA Deputy Director Sandra Thompson said on April 23, 2015. "While FHFA does not regulate servicers directly, it is crucial to clearly define and communicate servicer eligibility requirements.”

This January, the FHFA issued its proposed minimum eligibility requirements for GSE servicers in which they would have to meet minimum net worth, capital and liquidity requirements. The FHFA intended to finalize the plan in the second quarter with a six-month implementation timeline after that.

 
 
NEGATIVE RATES HALT PAYMENTS IN EUROPEAN ABS

According to a recent Bloomberg article, bonds backed by loans made to Spanish small businesses became the first ABS to stop making interest payments last week following a downward turn of benchmark rates.

The benchmark rate is now at minus 0.005 percent, according to data compiled by the European Money Markets Institute. Payments to investors ceased when the euro three-month interbank offered rate fell to zero.

Outstanding ABS investors are the latest to suffer the consequences of the European Central Bank’s efforts in reviving the euro-area ABS market with their ABS purchase program. Outstanding deals fell to 420.8 billion euros ($464.5 billion) at the end of March from 496.9 billion euros ($548.6 billion) a year earlier, according to data compiled by JPMorgan.

“The ECB’s interventions mean investors will either have to accept very low to negative yields or even zero coupons for good quality bonds, or move into more risky fixed-income sectors,” said Matthias Wildhaber, a money manager at Swiss & Global Asset Management AG.

 
 
TREASURY'S DR. STEGMAN REITERATES IMPORTANCE OF REVITALIZING PLS MARKET

In remarks delivered at the Fitch Ratings 2015 House View Conference, Dr. Michael Stegman, Counselor to the Secretary for Housing Finance Policy at the U.S. Department of the Treasury (“Treasury”), highlighted the efforts Treasury has engaged in over the past year to spur growth in the private label mortgage backed securities (“PLS”) market. Dr. Stegman noted Treasury views its role in “helping re-start this market as a high priority. Using our good offices and convening powers as important means of illuminating structural issues that need to be addressed….” Over the past year, Treasury gathered responses to a request for comment on PLS revitalization and released a Credit Rating Agency Exercise analysis. Over the past several months, the agency has convened market participants to discuss a potential benchmark transaction and other structural hurdles facing the PLS market.

 
 
DEMAND FOR EUROPEAN CMBS ON THE RISE

As several large institutions issue CMBS deals in Europe, record low returns from alternative fixed incomes assets are driving a return to CMBS in what could be the biggest year for the sector since 2007, according to an article in the Independent. Gordon Kerr, head of European structured finance research at DBRS said, “CMBS is an asset class that is primed to do well. Conditions are just right for issuance, with property prices going up in many parts of Europe, hedge fund and private equity firms looking to recycle capital, banks originating new loans and investors reaching for anything with a bit of yield.”

Upcoming issuance will lead to a tenfold increase in bonds over last year, to 1.3 billion euro, according to data cited in the article. Underlying the increase in European CMBS is a record 20 percent increase in European commercial real estate values and a 55 percent increase in real estate lending. Along with record low yields on fixed-income securities, these conditions make the European CMBS market appealing to investors.

 
 
NEW DATA REVEALS SPIKE IN SOUTH KOREAN ABS ISSUANCE

The issuance of ABS in South Korea jumped 41.1 percent to $10.7 billion in the first quarter of 2015, according to an article in Xinhua News. Recent data from the Financial Supervisory Service showed a correlation between ABS issuance in South Korea and an increased demand for mortgage loans, caused by a record policy rate cut by the Bank of Korea. While ABS issuance from financial companies decreased in the first quarter by 17.4 percent, during the same period the Korea Housing Finance Corporation increased its issuance of MBS by 181.9 percent.

 
 
UPCOMING EVENTS IN WASHINGTON
THE SENATE BANKING SUBCOMMITTEE ON SECURITIES, INSURANCE, AND INVESTMENT HEARING ENTITLED “EXAMINING INSURANCE CAPITAL RULES AND FSOC PROCESS”
THURSDAY, April 30, 2015
10:00 a.m. – 12:00 p.m. (ET)
Room 538 of the Dirksen Senate Office Building
 
 
SENATE BANKING FULL COMMITTEE MARK-UP: LEGISLATION ON REGULATORY RELIEF AND OTHER MATTERS
THURSDAY, MAY 14, 2015
10:00 a.m. (ET)
Room 538 of the Dirksen Senate Office Building
 
 
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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