August 6, 2014 Newsletter
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August 6, 2014
 

SFIG News

SFIG Calendar

Advocacy Outlook

Recent Developments

Next Week in Washington

 
SFIG NEWS
SFIG ISSUES FIRST EDITION RMBS 3.0 GREEN PAPER SERIES
This morning, SFIG released the First Edition of our RMBS 3.0 Green Paper Series, a series of papers aimed at restoring confidence to the “private label” residential mortgage-backed securities (“RMBS”) market.

The papers are a product of SFIG’s RMBS 3.0 initiative (“RMBS 3.0”) —a broad industry supported endeavor designed to develop proposed standards and reduce substantive differences within current market practices. The Green Papers are preliminary documents released with the aim of stimulating further debate and discussion. Ultimately, these are expected to evolve into a final set of “White Papers,” relating both to today’s release of Green Papers and to additional agenda items identified for future delivery.

SFIG’s RMBS 3.0 Task Force includes individual(s) from over 50 institutional members across all industry sectors. Work-streams are co-chaired by at least one issuer, one investor, and other relevant market participants. 

RMBS 3.0 Seeks To:

  • Create standardization where possible, in a manner that reflects widely agreed upon best practices and procedures.
  • Clarify differences in alternative standards in a centralized and easily comprehendible manner to improve transparency across RMBS deals.
  • Develop new solutions to the challenges that impede the emergence of a sustainable, scalable and fluid post-crisis RMBS market.
  • Draft or endorse model contractual provisions, or alternative “benchmark” structural approaches, where appropriate to reflect the foregoing

The release of SFIG’s Second Edition Green Papers is expected in early November 2014, to coincide with the SFIG/IMN’s 1st Annual Private Label RMBS Reform Symposium, November 12, New York Marriott Downtown, focused on the revitalization of the PLS market.

SFIG & IMN are proud to present this first of its kind conference, aimed at addressing the major obstacles that remain in the revitalization of a private label RMBS market, as well as potential solutions.

Created in consult with the major institutional buyers of RMBS, this unique forum will allow investors an opportunity to dialogue with key market stakeholders in the following main areas:

  1. Representations, Warranties and Repurchase Enforcement
  2. Due Diligence/Loan Review, Data and Disclosure
  3. Role of Transaction Parties and Bondholder Communications

Leading academics, renowned industry research analysts and economists will be on hand to discuss the broader issues currently plaguing the market, while more intensive board-room style discussions will be hosted, which are designed to find realistic and timely solutions that will allow this market to move forward. Full event details can be viewed here.

SFIG encourages interested members to join the RMBS 3.0 Task Force and contribute to the ongoing dialogue surrounding the topics released in today’s Green Papers, as well as future subject areas. To learn more about RMBS 3.0 and join the Task Force please contact Mary.Robinson@sfindustry.org.

 
 
SFIG SEEKS MANAGER/ASSISTANT DIRECTOR OF ABS POLICY
SFIG would like to remind its readers that we are currently looking to hire a Manager/Assistant Director of Policy to report to our Director of ABS Policy. The successful candidate will help support group-wide strategy efforts and initiatives in education and advocacy. Responsibilities would include, among others, working with the Policy Director and SFIG members to develop comment letters on a wide-range of subjects; providing data analysis integral to the development of advocacy materials; and producing presentation materials for meetings with regulators and policymakers as well as internal senior executive and Board meetings. The successful candidate should possess a minimum 5 years’ experience in a financial (preferably structured finance) or finance policy role. An undergraduate degree is required, with courses in finance, economics, or accounting strongly preferred. An MBA is preferred. If our readers know of interested parties, please direct them to Allison.Creswell@sfindustry.org.
 
 
SFIG CALENDAR
PROJECT RMBS 3.0 DUE DILIGENCE, DATA, & DISCLOSURE WORKING GROUP CONFERENCE CALL
WEDNESDAY, August 13, 2014
4:00 p.m. – 5:00 p.m. (EST)
 
 
PROJECT RMBS 3.0 ROLE OF THE TRUSTEE/BONDHOLDER COMMUNICATIONS WORKING GROUP CONFERENCE CALL
THURSDAY, August 14, 2014
3:00 p.m. – 4:00 p.m. (EST)
 
 
PROJECT RMBS 3.0 REPRESENTATIONS, WARRANTIES, & REPURCHASE ENFORCEMENT CONFERENCE CALL
THURSDAY, August 14, 2014
4:00 p.m. – 5:00 p.m. (EST)
 
 
CHINESE MARKET COMMITTEE CALL
THURSDAY, September 4, 2014
Time: TBD
 
 
IMN ABS EAST 2014 CONFERENCE (SFIG—LEAD ASSOCIATION PARTNER)
SUNDAY, September 21, 2014 – TUESDAY, September 23, 2014
The Fontainebleau Hotel
Miami Beach, FL
Registration available here
 
 
SFIG FALL SYMPOSIUM
TUESDAY, October 21, 2014
6:00 p.m. – 9:00 p.m. (EST)
Ernst & Young
5 Times Square
New York, NY 10036
Registration and agenda will be forthcoming

*Please note, this event is closed to the press.

 
 
SFIG & IMN 1st ANNUAL PRIVATE LABEL RMBS REFORM SYMPOSIUM
WEDNESDAY, November 12, 2014
New York Marriott Downtown
New York City, NY
Registration available here
 
 
SFIG & IMN ABS VEGAS 2015
SUNDAY, February 8, 2015 – WEDNESDAY, February 11, 2015
The Aria Resort and Casino
Las Vegas, NV
Registration 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 the First Edition of its Green Papers today. Participating members continue to work towards increasing the volume of private label securities in the secondary mortgage market through regular meetings via conference call to address issues specific to private label mortgage securities: 1) Representations, Warranties and Repurchase Enforcement; 2) Due Diligence/Loan Review, Data and Disclosure; and 3) Role of Trustees and Bondholder Communications. SFIG is also developing a response to the US Department of the Treasury’s request for input on Private Label Securities, which will be submitted in conjunction with delivery of the Green Papers. We encourage members to participate in any or all of the working groups to contribute towards the mission of Project RMBS 3.0. Please contact Mary.Robinson@sfindustry.org to join a working group or with any additional questions on Project RMBS 3.0.

The GSE Reform Task Force is developing comments in response to the FHFA’s request for input on guarantee fees. The Task Force previously focused on reviewing the Johnson-Crapo proposal, with SFIG staff summarizing its recommendations in a briefing book on the legislation. SFIG staff is currently reviewing the PATH Act, which will serve as the basis for the task force to develop a briefing book outlining members’ views on the House proposal for GSE reform. If you would like to learn more about SFIG’s activities with respect to housing finance reform, please contact Amanda.Bateman@sfindustry.org.

The Mortgage Loan-Level Disclosure Task Force has reviewed and developed additional data elements for potential disclosure. SFIG will use this work as a basis of discussions and correspondence with the Securities and Exchange Commission on the mortgage aspects of Regulation AB II. SFIG continues to have weekly Mortgage Industry Standards Maintenance Organization calls to go through data elements that lenders should deliver in securitizations. Please contact Alyssa.Acevedo@sfindustry.org for additional information on SFIG’s work on this topic.

The Volcker Task Force has worked with SFIG’s various asset class and legal counsel committees to identify areas within the Volcker Rule in need of clarification. The proposed questions and answers are currently being reviewed by the task force via a survey. If your institution intends to provide a response to the survey, please do so as soon as possible. Please contact Amanda.Bateman@sfindustry.org for additional information on the Volcker Task Force, including questions regarding the FAQ survey of task force members.

The Risk Retention Committee is continuing to follow up with regulators on risk retention questions across asset classes. Please contact Alyssa.Acevedo@sfindustry.org with any questions.

SFIG is continuing to build membership for its Chinese Market Committee and will be holding the first full committee call on September 4th. If you would like more information on SFIG’s work with respect to Chinese securitization, please contact Alyssa.Acevedo@sfindustry.org.

SFIG has launched its initiative to provide input for the Financial Stability Board’s “Shadow Banking” project. For more information on SFIG’s work on Shadow Banking, please contact Amanda.Bateman@sfindustry.org.

SFIG has established a coordinated approach for its members to respond to the IOSCO-BCBS-IAIS Survey of Market Participants regarding the impediments that may be preventing the development of sustainable, transparent securitization markets. Please contact Amanda.Bateman@sfindustry.org if you have any questions.

The Regulation AB II Task Force submitted its response to the SEC’s reproposal on asset level disclosure in late April of this year. The letter focused on the privacy aspects of the proposal, including concerns regarding reputational risks and potential liabilities related to the Fair Credit Reporting Act. We expect the final rule will be released in the near future. SFIG members who are interested in joining this task force or who have any questions should contact Alyssa.Acevedo@sfindustry.org.

SFIG is continuing to engage with regulators and legislators in order to further its advocacy efforts regarding the Liquidity Coverage Ratio proposal. Please contact Alyssa.Acevedo@sfindustry.org with your questions or comments.

The Derivatives in Securitization Task Force submitted a comment letter at the end of June, advocating for asset-backed securities issuers to qualify for the “low-risk financial end user” designation proposed by the prudential regulators in their original proposal. SFIG members who are interested in learning more about this initiative should email Alyssa.Acevedo@sfindustry.org.

 
 
RECENT DEVELOPMENTS
FINANCIAL STABILITY OVERSIGHT COUNCIL LESS LIKELY TO LABEL SEVERAL ASSET MANAGERS AS SIFIs
On July 31st, the Financial Stability Oversight Council (”FSOC”) agreed to overhaul their review of asset-management firms and focus on potentially risky products and activities rather than individual firms. This shift by the FSOC decreases the probability that an individual asset management firm may be labeled as a systemically important financial institution (“SIFI”). With a SIFI designation, the firms face greater oversight by the Federal Reserve (“FRB”) and stricter regulations.

Asset-managers have told lawmakers and policy makers for months that their firms do not pose the same threats as big banks, and therefore, should not be subject to the same regulations and FRB oversight.

According to a Wall Street Journal article, a spokeswoman for one of the companies indicated that she was “encouraged” by the FSOC’s new focus, although the agency has not indicated which asset-management activities or products it would be reviewing.

 
 
CREDIT UNION SECURITIZATION MAY ADD COMPETITION TO AUTO FINANCE MARKET
The National Credit Union Administration (“NCUA”) released a proposal in late June to permit federal credit unions to securitize loans, which could help enhance competition in the auto market. Moody’s has reported that this proposal “could make auto loan securitizations an attractive way for credit unions to maintain their recent strong growth in the sector,” but also noted that the new rule would not be limited to a particular asset class.

Until now, credit unions have not been explicitly authorized to securitize loans. However, in the proposed rule, the NCUA states that it now views the securitization of loans that were originated by a sponsoring credit union to its members as a necessary tool to promote effective business and would authorize such activities under the Federal Credit Union Act.

"Credit unions have a substantial market share in auto lending, and auto loans are the credit unions' fastest growing and most widely offered product," the NCUA reported in its proposed rule. "While the Federal Credit Union Act explicitly authorizes [a federal credit union] to sell its loans, it provides no express authority to securitize them."

Moody’s also highlighted that “in the past, credit unions have not securitized their auto loans. Their funding sources contrast with those of the banks and captives, which have a long history of securitization servicing and warehouse funding opportunities in the capital markets. If credit unions start securitizing, we will benchmark the quality of their historical data and historical performance volatility against their auto ABS peers. Other comparative factors that help establish appropriate loss protection levels are a credit union’s ABS collateral pool and managed portfolio characteristics, structural features including triggers, transaction governance and oversight and the alignment of interest with those of auto ABS investors.”

The NCUA is currently seeking comments on its proposal through August 25th and a final rule is expected later this year.

 
 
PBOC PUSHES FOR GREATER BANK REFORMS
Last Friday, the People’s Bank of China (“PBOC”) announced an expansion of reforms to the nation’s banks and other large financial institutions in order to improve their service. Specifically, the reforms will focus on the Export-Import Bank of China and the Agricultural Development Bank of China in order to standardize their accounting.

The PBOC is seeking to build a sustainable model through which commercial banks may improve certain sectors of their financial services. Improving standards and regulations regarding internet finance in order to create fair competition and enhance risk control will also be addressed.

This push for deeper bank reforms follows a PBOC notice released several months ago regarding the improvement and expansion of market access and falls in line with the central bank’s efforts to press ahead with financial reform. The aim of the notice is to “help(s) to balance the relationship between government and market so as to let (the) market play a decisive role.”

SFIG’s Chinese Market Committee will be sharing and defining best practices as the market grows. If you would like to join this committee, please contact Alyssa.Acevedo@sfindustry.org.

 
 
GAO REPORT FINDS LARGE BANK SUBSIDY REDUCED
On July 31st, the U.S. Government Accountability Office (“GAO”) released its highly anticipated “Large Bank Holding Companies: Expectations of Government Support” report.

The study found that the largest banks benefitted more from lower funding costs than smaller rivals did during the 2008 financial crisis relative to economic boom times. However, these advantages declined, or reversed, in 2013 according to the study.

The report also showed that market participant views varied with many believing that recent regulatory reforms have reduced, but not eliminated, the likelihood that the federal government would prevent the failure of one of the largest bank holding companies. An analysis of funding cost difference between large and small banks was also provided within the study.

The report comes after two years of congressional and industry debate over whether large banks continue to benefit from a too-big-to-fail subsidy despite regulatory changes. This is the second of two reports issued by the GAO on the topic of economic benefits that the largest bank holding companies have received because of actual or perceived government support. Senators Sherrod Brown (D-OH) and David Vitter (R-LA) first requested the report in 2013.

 
 
BANKING INDUSTRY PUSHES FOR SENATE CYBERSECURITY VOTE
The Senate is facing increased pressure from the banking industry to pass the Cybersecurity Information Sharing Act this fall that would encourage voluntary information sharing between private companies and the federal government.

Last Thursday, a dozen financial groups sent a letter to Senators, urging them to take up the bill as soon as possible. "As it stands today, our laws do not do enough to foster information sharing and establish clear lines of communication with the various government agencies responsible for cybersecurity," the letter states. "Simply put, there is a limit to our ability to protect our customers and there is a clear need for Congress to act."

As SFIG reported last month, the Senate Intelligence Committee approved the bill by a vote of 12-3 during a closed-door markup. However, it remains unclear whether the full chamber will take up the bill this year.

 
 
HOUSE VOTES TO EASE CAPITAL REQUIREMENTS FOR MORTGAGE SERVICING
The Housing Financial Services Committee approved a series of bills last Wednesday, including one sponsored by Rep. Blaine Luetkemeyer (R-MO) which would delay implementation of capital rules under Basel III that set higher requirements for mortgage servicing rights (“MSRs”). The relief would only apply to institutions with less than $50 billion of assets, meant to protect “community banks.” The bill would also require regulators take six months to undertake a study on the appropriate level of capital that mortgage servicers should hold, and implement the new capital requirements within three months of that determination.

Basel III currently limits mortgage servicing assets to 10 percent of a bank’s Tier 1 common equity, with assets under the cap eventually risk-weighted at 250 percent, with combined holdings of mortgage servicing and other related assets not exceeding 15 percent. These requirements have allegedly forced small and community banks to sell their MSRs. Congress has indicated it will work to define what size constitutes a community bank, and Ranking Member Maxine Waters (D-CA) has suggested $10 billion or less may be more appropriate.

 
 
NEXT WEEK IN WASHINGTON
FEDERAL DEPOSIT INSURANCE CORPORATION 4TH ANNUAL CONSUMER RESEARCH SYMPOSIUM
THURSDAY, October 16, 2014 – FRIDAY, October 17, 2014
FDIC L. William Seidman Center
Hove Auditorium
3501 Fairfax Drive
Arlington, VA 22226
This symposium will focus on the recent research on consumers’ capabilities, knowledge, preferences, and experiences in the market for financial products and services, as well as the effects of public policy interventions and new regulations on consumers, households, communities, and financial institutions.
Registration is 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

Sonny Abbasi Director of MBS Policy

Sairah Burki Director of ABS Policy

Michael Flood Director of Advocacy

Mary Robinson Senior Policy Analyst

Alyssa Acevedo Policy Analyst

Amanda Bateman Policy Analyst

Jennifer Serpas Office Manager

Allison Creswell Executive Administration


1775 Pennsylvania Ave. NW
Suite 625
Washington, DC 20006

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