December 18, 2014 Newsletter
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December 18, 2014
 

SFIG News

SFIG Calendar

Advocacy Outlook

Industry News Highlights

 
SFIG NEWS
SFIG LAUNCHING WOMEN IN SECURITIZATION WITH SPECIAL EVENT AT ABS VEGAS
On December 11th, SFIG formally announced the launch of our “Women in Securitization” initiative. This program will provide a means of connecting women in structured finance to peers, mentors and sponsors, and ideas that will positively influence industry perceptions and practices, and facilitate an environment in the securitization community that encourages women’s advancement through four separate channels:
  • Industry Engagement,
  • Peer Mentoring and Sponsorship,
  • Education Initiatives, and
  • Events and Social Opportunities.

The program’s committee will be chaired by Patricia Evans of Wilmington Trust and Wendy Cohn of Fitch Ratings and each channel will be led by key female leadership selected from SFIG members.

Participation in the program is open to all industry participants, both members and non-members alike, and we encourage you to register for the initiative online. Men who are interested in supporting the initiative are also encouraged to register.

SFIG is excited to ask industry women to “Save the Date” and celebrate the launch of Women in Securitization at a special event held in conjunction with ABS Vegas. The launch event will take place at the Gold Lounge at the Aria on February 8, 2015 from 3:00 p.m. – 5:00 p.m. (PST).

For more information on Women in Securitization, please contact Mary.Robinson@sfindustry.org.
 
 
SFIG DISCUSSES HOUSING MARKET AND RMBS 3.0 ON PANEL DESIGNED FOR CONGRESSIONAL STAFF
On Tuesday, the Milken Institute’s Center for Financial Markets and Georgetown University’s Center for Financial Markets and Policy hosted a panel discussion for Congressional staff entitled “Housing Finance Reform:  Market Developments and Opportunities in 2015.”  Panelists included Richard Johns, SFIG’s Executive Director, John Sim (J.P. Morgan), Ed DeMarco (Milken) and Professor Phillip Swagel (University of Maryland).

Mr. Johns’ comments focused on impediments to the return of the private label residential mortgage-backed securities (“RMBS”) marketplace, and SFIG’s Project RMBS 3.0, a broad industry supported endeavor designed to develop proposed standards and reduce substantive differences within current market practices.

The panel discussion follows SFIG and IMN’s successful first Private Label RMBS Reform Symposium and the release of its Second Edition RMBS 3.0 Green Papers.  For more information on SFIG’s Project RMBS 3.0, please contact Mary.Robinson@sfindustry.org.
 
 
PRESIDENT SIGNS OMNIBUS APPROPRIATIONS BILL, INCLUDES SFIG SUPPORTED BAN ON GOVERNMENT FINANCING OF EMINENT DOMAIN LOANS
On Tuesday, President Obama signed H.R. 83, the $1.1 trillion omnibus appropriations bill to fund most all government programs through fiscal year (“FY”) 2015, into law. Important to securitization, the new law includes a provision that will make it more difficult for municipalities to use eminent domain to seize underwater mortgages. 

Specifically, section 236 of the bill prohibits appropriated funds for FY 2015 from being used by the Department of Housing and Urban Development, the Government National Mortgage Administration or the Federal Housing Administration “to insure, securitize, or establish a Federal guarantee for 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.” Fannie Mae and Freddie Mac are already prevented from financing such loans.

SFIG has consistently opposed the use of eminent domain to seize securitized mortgage loans for the purposes of modification.  On August 30, 2013, SFIG filed an amicus curiae brief 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 do permanent damage to the U.S. home mortgage system. SFIG also stated in the brief that eminent domain would “harm prospective homeowners across the country by imposing new, unanticipated and unquantifiable risks upon investors in mortgages, depressing the value of mortgage-based investments, and impeding the return of private capital to the residential mortgage market.” These views were also expressed in SFIG’s Eminent Domain Position Paper and an April, 2014, Joint Trade Associations letter signed by SFIG supporting an amendment to the Johnson-Crapo bill from Senators Pat Toomey (R-PA) and Tom Coburn (R-OK) that would prohibit its use by government agencies and the government-sponsored enterprises.
 
 
SFIG JOINS AFSA IN REQUESTING SECURITIZATION EXEMPTION UNDER CFPB LARGER PARTICIPANT RULE
On December 8th, SFIG joined the American Financial Services Association in commenting on the Consumer Financial Protection Bureau’s (“CFPB”) proposed rule that would identify a market for automobile financing and define as larger participants of this market certain nonbank covered persons that would be subject to the CFPB’s supervisory authority. The test to determine “larger participants” includes an annual originations threshold, but the CFPB has proposed that asset-backed securities be excluded from this calculation. SFIG contributed to the section of the letter refining the exemption for asset backed securities.
 
 
HAPPY HOLIDAYS FROM SFIG
SFIG will not publish a newsletter over the next two weeks in celebration of the holidays. We wish you all safe and happy holidays and hope you have a Happy New Year. We look forward to working with you all in 2015 and will resume the Newsletter on January 7th.
 
 
SFIG CALENDAR
BIWEEKLY CREDIT CARD ISSUER CALL RE: REGULATION AB II

THURSDAY, December 18, 2014
10:00 a.m. – 11:00 a.m. (EST)

 
 
EXTERNAL ACCOUNTANT SUBCOMMITTEE CALL

THURSDAY, December 18, 2014
1:30 p.m. – 2:30 p.m. (EST)

 
 
BIWEEKLY RESIDENTIAL MORTGAGE COMMITTEE CALL RE: REGULATION AB II

THURSDAY, December 18, 2014
2:00 p.m. – 3:00 p.m. (EST)

 
 
BIWEEKLY NRSRO DUE DILIGENCE INDUSTRY GUIDE WORKING GROUP CALL

THURSDAY, December 18, 2014
3:00 p.m. – 4:00 p.m. (EST)

 
 
WEEKLY HIGH QUALITY SECURITIZATION TASK FORCE CALL

TUESDAY, December 23, 2014
10:00 a.m. – 11:00 a.m. (EST)

 
 
SFIG & IMN ABS VEGAS 2015

SUNDAY, February 8, 2015 – WEDNESDAY, February 11, 2015
The Aria Resort and Casino
Las Vegas, NV
Registration available here

 
 
WOMEN IN SECURITIZATION LAUNCH EVENT

SUNDAY, February 8, 2015
3:00 p.m. – 5:00 p.m. (PST)
The Gold Lounge at the Aria
Las Vegas, NV
Sign up for Women in Securitization here, invitation to follow

 
 
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. 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 has been actively engaging the Federal Housing Finance Agency (“FHFA”) in recent months, including SFIG’s October 13th response to the proposed structure for a single agency security. SFIG has also recently submitted comments on guarantee fee pricing and FHFA’s Strategic Plan for 2015-2019. The Task Force previously reviewed various proposals in Congress including the Johnson-Crapo bill, with SFIG staff summarizing members’ recommendations in a briefing book, and the PATH Act. If you would like to learn more about SFIG’s activities in these areas, 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 this year. 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 Mary.Robinson@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 Amanda.Bateman@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. If you would like more information on SFIG’s work with respect to Chinese securitization, please contact Amanda.Batemand@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. Monthly task force calls will be held to identify and address key questions regarding the implementation of the final rule. We will also be holding biweekly calls for the asset-level committees. SFIG members who are interested in joining this task force or asset specific committees should contact Mary.Robinson@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 review the BCBS final standard for the Net Stable Funding Ratio (“NSFR”) and develop a comment letter when U.S. regulators release their proposed NSFR. To become involved in SFIG’s advocacy on the Final LCR rule or NSFR, please contact Mary.Robinson@sfindustry.org.

The Derivatives in Securitization Task Force 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, 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. Those interested in learning more should contact Amanda.Bateman@sfindustry.org.

The Money Market Fund Reform Working Group submitted a comment letter on October 13th regarding the Securities and Exchange Commission’s July 23rd 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 Amanda.Batemand@sfindustry.org.

The High Quality Securitization (“HQS”) Task Force will serve as the forum through which SFIG will respond to recent initiatives that seek to define “qualifying securitizations.” This Task Force is currently developing a response to the European Banking Authority’s Discussion Paper on simple standard and transparent securitization, with conference calls taking place each Tuesday at 10:00 am (EST). The Task Force will also comment on the BCBS/IOSCO paper. If you are interested in joining the Task Force, please email Amanda.Bateman@sfindustry.org.
 
 
INDUSTRY NEWS HIGHLIGHTS
BCBS, IOSCO CONSULT ON SIMPLE, TRANSPARENT AND COMPARABLE SECURITIZATIONS

The Basel Committee on Banking Supervision (“BCBS”) and International Organization of Securities Commissions (“IOSCO”) released their long-anticipated consultative document on Criteria for identifying simple, transparent and comparable securitizations. As stated in a joint press release from the international standard-setting bodies, the purpose of the criteria is to identify and assist with the development of such structures, as well as help parties to a transaction better evaluate the risks associated with a particular transaction. According to IOSCO Chairman Greg Medcraft, “Investors' confidence in securitisations has diminished since the onset of the financial crisis. Securitisations are perceived as too complex and insufficient information is available to investors to perform their risk assessments. The proposed criteria in this paper try to address some of these issues." 

The BCBS and IOSCO offer the following definitions for the criteria under their proposed framework: 

  • Criteria promoting simplicity refer to the homogeneity of underlying assets with simple characteristics, and a transaction structure that is not overly complex.
  • Criteria on transparency provide investors with sufficient information on the underlying assets, the structure of the transaction and the parties involved in the transaction, thereby promoting a more thorough understanding of the risks involved. The manner in which the information is available should not hinder transparency, but instead it should support investors in their assessment.
  • Criteria promoting comparability could assist investors in their understanding of such investments and enable more straightforward comparison between securitization products within an asset class.

BCBS and IOSCO note that this criteria may be supplemented or expanded upon as needed, though issues related to implementation, including potential impact on regulation, is not within the scope of their consultation. Comments are due on February 13, 2015. 

The proposal parallels work undertaken by the European Central Bank and Bank of England last summer, which SFIG commented on, and a consultation currently underway at the European Banking Authority ("EBA") to establish criteria for high quality securitizations. SFIG will comment on both the EBA and BCBS-IOSCO consultations through its High Quality Securitization Task Force, and members interested in participating should email Amanda.Bateman@sfindustry.org.

 
 
FINAL REVISIONS TO THE SECURITIZATION FRAMEWORK RELEASED BY BCBS

The Basel Committee on Banking Supervision (“BCBS”) announced the release of its revisions to the securitization framework intended to strengthen capital standards for bank-held securitization exposures. The release follows the BCBS’ public consultation on the proposals earlier this year to address weaknesses in the Basel II framework, including an over-reliance on external credit ratings, lack of risk sensitivity, cliff effects and insufficient capital for certain exposures. The revisions include a streamlined hierarchy of approaches that can be used for calculating risk-based capital requirements, as well as changes to the risk drivers used under each approach and the framework’s calibration for the amount of capital banks must hold. 

SFIG worked with the Global Financial Markets Association, Commercial Real Estate Finance Council, Commercial Real Estate Finance Council Europe, Institute of International Finance, International Association of Credit Portfolio Managers, International Swaps and Derivatives Association and Securitization Forum of Japan to submit comments in March 2014 in response to the BCBS' earlier consultation. For questions regarding SFIG’s related advocacy, please contact Sairah.Burki@sfindustry.org.

 
 
SEC’S WHITE OUTLINES REFORMS PLANNED FOR ASSET MANAGEMENT INDUSTRY IN 2015

During a recent speech in New York City, Securities and Exchange Commission (“SEC”) Chair Mary Jo White outlined her agency's plan to enhance and strengthen regulation of the asset management industry, which she refers to as one of its most important responsibilities. According to White, the Investment Company Act and Investment Advisors Act of 1940 gave the SEC three primary tools to regulate these activities: 1) controls on conflicts of interest; 2) a registration, reporting and disclosure regime; and 3) controls on fund portfolio composition risks and operations risks. White's speech focused on the latter of these tools, and provided an overview of recent actions the SEC has taken to evaluate and enhance its regulations in this area, such as the approval of money market fund reform rules. The SEC then outlined the areas in which work is still needed.

For 2015, White told audiences that SEC staff is developing recommendations for three core initiatives, which address 1) improving the data used to evaluate risk in the asset management industry; 2) ensuring registered funds enhance their fund-level controls to better manage portfolio risks; and 3) ensuring firms have appropriate plans in place to transition their clients' assets when warranted. To enhance data reporting, the SEC is developing recommendations for the SEC to modernize and enhance reporting for both funds and advisors. This work includes changes to the reporting of census information, fund investments in derivatives, the liquidity and valuation of their holdings, and their securities lending practices. White concluded by touching on the question of systemic risk in the asset management industry, stating "the market perspective that the SEC brings is an essential component of the [Financial Stability Oversight Council's] efforts" to review the industry.

According to White, 2015 promises to be an active year for the SEC’s oversight of the asset management industry:

“While the SEC’s regulation of asset management is strong and comprehensive, the source of that strength has been our willingness to take stock of our rules with a clear vision and implement the necessary changes to make effective regulation that fits current market realities. We have done that many times since 1940, and it is essential that we do so again in 2015."
 
 
SHELBY TO CHAIR BANKING, BROWN TO BE RANKING MEMBER NEXT CONGRESSS

On Monday, Republicans announced committee assignments for the 114th Congress. Important to the securitization industry, Senator Shelby (R-AL) is expected to chair the Senate Committee on Banking, Housing, and Urban Affairs (“Banking”) over the next two years. Last week, Senator Sherrod Brown (D-OH) was announced as the ranking member, or leader for the minority, on the Banking Committee.

The Banking Committee will include the following Republican Senators in rank order: Senator Richard Shelby (R-AL), Senator Mike Crapo (R-ID), Senator Bob Corker (R-TN), Senator David Vitter (R-LA), Senator Pat Toomey (R-PA), Senator Mark Kirk (R-IL), Senator Jerry Moran (R-KS), Senator Tim Scott (R-SC), Senator Tom Cotton (R-AR), Senator Mike Rounds (R-SD), Senator Ben Sasse (R-NE), and Senator Dean Heller (R-NV).

Democrats are expected to announce their committee assignments in the coming weeks.
 
 
CONGRESS ADJOURNS WITHOUT REAUTHORIZING THE TERRORISM RISK INSURANCE PROGRAM

Yesterday, Congress adjourned for the year without reauthorizing the Terrorism Risk Insurance Act (“TRIA”), which is set to expire on December 31st

Last week, the House had passed a 6-year TRIA reauthorization by a vote of 417-7 last. Yesterday, Senate Majority Leader Harry Reid (D-NV) tried to hold a vote on the House-passed bill, but Senator Tom Coburn (R-OK) objected to the vote and effectively blocked Congress from extending the TRIA.  Coburn had said earlier this week that he would block the bill unless states are allowed to opt out of the federal program – a modification the retiring senator had asked Reid to include, but the Democratic Senate majority leader rejected.

Talks to resolve the disagreement broke down last week when House Financial Services Chairman Jeb Hensarling (R-TX) included a bipartisan revision to the Dodd-Frank law that exempts manufacturers, energy companies and agricultural firms from putting up collateral when they’re trading derivatives. The revisions passed in the House with 181 democratic votes, however Senator Schumer (D-NY) and other Senate Democrats strongly opposed these changes.

TRIA will likely be a priority in the new Congress, who will have to consider whether the program will need to be reauthorized retroactively.

 
 

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 Policy Manager

Alyssa Acevedo Policy Analyst

Amanda Bateman Policy Analyst

Jennifer Serpas Office Manager

Allison Creswell Executive Administration


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