January 14, 2015 Newsletter
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January 14, 2015
 

SFIG News

SFIG Calendar

Advocacy Outlook

Industry News Highlights

 
SFIG NEWS
SFIG SUBMITS COMMENT TO THE EBA ON SIMPLE, STANDARD AND TRANSPARENT SECURITIZATIONS
SFIG submitted comments this afternoon to the European Banking Authority ("EBA") in response to its consultation on criteria to identify simple, standard and transparent ("SST") securitizations that would receive preferential regulatory treatment. SFIG formulated its response through the High Quality Securitization Task Force, with Lewis Cohen of Hogan Lovells LLP serving as drafting counsel.

SFIG's High Quality Securitization Task Force is now developing a response to the consultative document released by the Basel Committee on Banking Supervision ("BCBS") and International Organization of Securities Commissions ("IOSCO") in which the global regulators propose their own criteria for identifying “simple, transparent and comparable securitizations.” The BCBS has also noted that it will consider incorporating the finalized criteria into the revised securitization capital framework released last month. Comments are due on February 13, 2015. Members interested in participating in the response effort should contact Amanda.Bateman@sfindustry.org
 
 
REGISTER FOR ABS VEGAS 2015
With over three weeks remaining until ABS Vegas 2015, attendance and sponsorship is going through the roof, with over 150 sponsors to-date and growing. Approximately 4,500 participants are registered, with almost 2,000 investors and issuers. Don’t miss the chance to be part of the world’s largest capital markets conference.

Click here for the conference agenda. Click here to register for ABS Vegas 2015.
 
 
WOMEN IN SECURITIZATION LAUNCHING AT ABS VEGAS—INVITATIONS FORTHCOMING!
SFIG is gearing up to launch our Women in Securitization initiative next month at ABS Vegas. In celebration of this exciting initiative, we welcome the women of structured finance to register to join us at the official launch event:

When:  Sunday, February 8, 2015 from 3:00-5:00 p.m. PST
Where:  Deuce Lounge at the Aria, Las Vegas NV

Presented by SFIG with the generous support of:

 Chapman and Cutler LLP
 Fitch Ratings
 Wilmington Trust

The launch event will feature a poker workshop and will provide participants with everything they need to know to win at the poker table. We hope that not only will you leave with an understanding of how to play poker, but also the knowledge of how to apply the principles of poker to succeed in the corporate world. Through interactive poker tutorials and play, participants can learn about how poker principles build confidence and strengthen negotiating tactics to help women play to win. No previous experience playing poker is necessary.

Invitations are forthcoming and will be sent to all industry women who registered for Women in Securitization. If you have not yet signed up it is not too late and we encourage all industry participants, both members and non-members alike, to register for Women in Securitization.

Women in Securitization connects the women of our industry to peers, mentors and sponsors, and ideas that will positively influence industry perceptions and practices to facilitate an environment in the securitization community that encourages women’s advancement. For additional information on the event or Women in Securitization please contact Mary.Robinson@sfindustry.org.

 
 
SEC INVITES YOU TO PARTICIPATE IN ABS VEGAS Q&A SESSIONS
The Securities and Exchange Commission (“SEC”) will be holding two Q&A sessions at SFIG’s ABS Conference in Vegas.

  • The first session, focusing on Regulation AB II implementation, will occur on Monday, February 9th from 11:00 a.m. – 12:00 p.m. (PST).
  • The second session, covering implementation questions related to risk retention, will occur on Tuesday, February 10th from 11:45 a.m. – 12:45 p.m. (PST).

The SEC welcomes questions ahead of these sessions and SFIG members may submit questions directly to SFIG staff. If you are interested in attending either of the sessions or submitting a question, please email Mary.Robinson@sfindustry.org (Regulation AB II) or Amanda.Bateman@sfindustry.org (risk retention). SFIG will then share questions received with the SEC on an anonymous basis. Please note that members of the media will not be permitted to attend these sessions.
 
 
HOUSE PASSES SFIG-SUPPORTED CLO FIX FOR VOLCKER RULE
Today, the House of Representatives passed H.R. 37 by a bipartisan vote of 271-154. Of importance to the structured finance industry, Title VIII of the bill contains SFIG-supported language to amend the Volcker rule as it relates to collateralized loan obligation (“CLO”) compliance.

Title VIII would permit holders of CLOs – many of which are community and regional banks – additional time to either divest or amend any remaining legacy CLO issued prior to January 31, 2014, to conform to the Volcker rule by July 21, 2019. Notwithstanding this bill, any CLO issued after January 31, 2014 continues to have to comply by July 21, 2017, allowing the Volcker rule to remain fully intact.

“This bill is a common sense solution that will help prevent needless investment fire sales by banks who have made prudent investments in their local businesses and communities, and helps ensure continued funding can be delivered by those banks in support of the real economy,” stated Richard Johns, SFIG’s Executive Director.

SFIG and its member firms will continue to educate lawmakers on Title VIII of the bill, and its importance to CLO liquidity. Please contact Mike Flood Michael.Flood@sfindustry.org for any questions on the legislation.
 
 
PRESIDENT SIGNS SFIG-SUPPORTED TRIA REAUTHORIZATION INTO LAW
On Monday, President Barack Obama signed an SFIG-supported six-year reauthorization of the Terrorism Risk Insurance Act (“TRIA”) into law, until December 31, 2020.  After the 9/11 terrorist attacks, the U.S. economy froze as commercial mortgage and commercial mortgage-backed securities lenders required terrorism insurance while businesses were unable to obtain it from insurers. TRIA provides this critical federal reinsurance backstop for property insurers in the case of a terrorist attack, while protecting U.S. taxpayers through mandatory repayment by insurers for any federal assistance received. Please contact Michael.Flood@sfindustry.org with any questions.
 
 
US SUPREME COURT RULES THAT TRUTH IN LENDING ACT ONLY REQUIRES WRITTEN NOTICE TO LENDER
On Tuesday, the US Supreme Court (the “Court”) ruled in Jesinoski v. Countrywide Home Loans, Inc. that the Truth in Lending Act (“TILA”) only requires written notice to a mortgage lender within three years in lieu of requiring a borrower to file a lawsuit. TILA allows a borrower to rescind within the first three days following the consummation of a mortgage transaction or the delivery of the disclosures required under TILA. However, this right is extended to three years if a lender fails to make the required disclosures under TILA.

SFIG had filed an Amicus Brief in support of the position that a borrower must actually file suit prior to the lapse of a three year period set forth in TILA and that written notice should not be sufficient for a borrower seeking to rescind. In the Amicus Brief, SFIG highlighted the potential impact on the private label mortgage-backed securities market if the Court ruled that written notice was sufficient to rescind a mortgage under TILA, including the prospect for additional claims by borrowers and the potential for disputes among transaction parties with respect to representations and warranties.
 
 
JOIN SFIG & IMN FOR THE 2015 CONFERENCE OF THE CHINA SECURITIZATION FORUM
SFIG is pleased to support the 2015 Annual Conference of the China Securitization Forum (“CSF”), taking place March 24-25, 2015 at the JW Marriott Hotel, Beijing. The event, hosted by CSF and IMN, will bring together leading investors, issuers, regulators, international financial institutions, law firms, accounting firms, rating agencies, servicers and more for two days of programming covering various topics important to this quickly growing market.

Registration is available here and members interested in learning more should email Amanda.Bateman@sfindustry.org to join SFIG’s Chinese Market Committee.
 
 
SFIG CALENDAR
BIWEEKLY CREDIT CARD ISSUER COMMITTEE CALL REGARDING REGULATION AB II

THURSDAY, January 15, 2015
10:00 a.m. – 11:00 a.m. (EST)

 
 
BIWEEKLY RESIDENTIAL MORTGAGE COMMITTEE CALL REGARDING REGULATION AB II

TUESDAY, January 15, 2015
2:00 p.m. – 3:00 p.m. (EST)

 
 
MONTHLY EXTERNAL COUNSEL SUBCOMMITTEE CALL

MONDAY, January 19, 2015
11:00 a.m. – 12:00 p.m. (EST)

 
 
WEEKLY HIGH QUALITY SECURITIZATION TASK FORCE CALL

TUESDAY, January 20, 2015
10:00 a.m. – 11:00 a.m. (EST)

 
 
BIWEEKLY REGULATION AB II INDUSTRY GUIDE CALL

TUESDAY, January 20, 2015
2:00 p.m. – 3:00 p.m. (EST)

 
 
BIWEEKLY REGULATION AB II COMMENT LETTER CALL

WEDNESDAY, January 21, 2015
10:00 a.m. – 11:00 a.m. (EST)

 
 
BIWEEKLY NRSRO DUE DILIGENCE INDUSTRY GUIDE WORKING GROUP CALL

THURSDAY, January 22, 2015
3:00 p.m. – 4:00 p.m. (EST)

 
 
BIWEEKLY EQUIPMENT ISSUER COMMITTEE CALL REGARDING REGULATION AB II

MONDAY, January 26, 2015
2:00 p.m. – 3:00 p.m. (EST)

 
 
WEEKLY HIGH QUALITY SECURITIZATION TASK FORCE CALL

TUESDAY, January 27, 2015
10:00 a.m. – 11:00 a.m. (EST)

 
 
BIWEEKLY RISK RETENTION INDUSTRY GUIDE WORKING GROUP CALL

TUESDAY, January 27, 2015
11:00 a.m. – 12:00 p.m. (EST)

 
 
REGULATION AB II INDUSTRY GUIDE CALL

TUESDAY, January 27, 2015
2:00 p.m. – 3:00 p.m. (EST)

 
 
MISMO STRUCTURED FINANCE DEVELOPMENT WORKGROUP

TUESDAY, January 27, 2015
3:30 p.m. – 5:00 p.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 Deuce 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 on several fronts, including SFIG’s response to the proposed structure for a single agency security. SFIG has also 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 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 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.Bateman@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. The working group meets biweekly on Thursdays at 3:00 p.m. (EST) 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 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.Bateman@sfindustry.org.

The High Quality Securitization Task Force is currently developing a response to the BCBS-IOSCO consultation on its criteria for identifying simple, transparent and comparable securitizations. Comments are due on February 13, 2015 and the task force will meet on Tuesdays at 10:00 a.m. (EST) until then to formulate its views. SFIG’s comments will build off of those sent to the European Banking Authority on January 14th (available here) regarding their 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. To join the High Quality Securitization Task Force and contribute to the BCBS-IOSCO comment letter, please contact Amanda.Bateman@sfindustry.org.

 
 
INDUSTRY NEWS HIGHLIGHTS
COMMERCIAL MORTGAGE UNDERWRITING STANDARDS SLOWLY LOOSENING
According to an article in National Mortgage News, commercial mortgage underwriting standards are slowly beginning to loosen and could lead to potential issues for commercial mortgage-backed securities (“CMBS”) investors. Researchers generally expect lenders to continue to relax standards at the continued slow pace that has been taking shape of late. Rating agencies, according to the article, agree that underwriting standards are not as loose as 2005 to 2007, but the gap that existed after the Great Recession is not as wide as it once was. Separately, the article noted that CMBS volume is expected to increase through 2015 due to loan maturities coming due, economic optimism and increased capital allocations. Furthermore, one analyst also indicated that there are likely to be increases in distressed loans as well.
 
 
PRESIDENT OBAMA CALLS FOR WIND DOWN OF FANNIE MAE AND FREDDIE MAC
On Thursday, President Barack Obama and Secretary of Housing and Urban Development Julián Castro both spoke on housing policy in Phoenix, Arizona. The President highlighted the improvement in the housing market that occurred during his tenure and cited actions that his Administration has taken over several years to prop up the housing market. The President reiterated an announcement that his Administration made the day prior concerning reducing the insurance premium charged by the Federal Housing Administration to insure mortgage loans by 0.5 percent. Of note to SFIG members, the President restated his position on housing finance. “And that’s why I’ve called on Congress to wind down the government-backed companies known as Fannie Mae and Freddie Mac,” stated the President.
 
 
CFPB DIRECTOR RICHARD CORDRAY RELEASES MORTGAGE EDUCATION TOOL
Consumer Financial Protection Bureau (“CFPB”) Director Richard Cordray spoke at the Brookings Institution on Tuesday about the ongoing work of the CFPB to help consumers gain greater control over the mortgage process. Americans may be spending more time shopping for appliances and televisions than for a mortgage, a report from the agency suggests. The report also found that consumers are getting much of their information about mortgages from sources that have a vested interest in the outcome. Director Cordray said that “almost half of consumers who take out a mortgage to buy a home fail to shop before applying for a mortgage” because it is hard to understand how to shop and the process can be intimidating. In a campaign to start changing the culture of how people obtain mortgages, the CFPB is releasing its “Know Before You Owe” initiative called “Owning a Home.” Owning a Home is a set of tools offered to empower consumers shopping for a mortgage, assisting the consumer throughout the home buying experience, with a guide to loan options and a closing checklist.
 
 
HUD SECRETARY JULIÁN CASTRO CALLS FOR LENDING STANDARDS TO BE EASED
In a speech to the National Press Club on Tuesday, U.S. Department of Housing and Urban Development (“HUD”) Secretary Julián Castro said that it is time to make it easier to borrow money for a home and called for banks to loosen lending standards. Secretary Castro also announced that no further FHA fee reductions are under consideration. During the question and answer session after his speech, Secretary Castro made several remarks on Fannie Mae and Freddie Mac in response to questions on prospects for housing finance reform. The Obama administration remains committed to the principles of the Johnson-Crapo bill, which calls for the wind down of Fannie Mae and Freddie Mac, Secretary Castro said. “There’s a way to have a government backstop for mortgages that doesn’t place the taxpayers at as much risk as pre-crisis Fannie and Freddie did.”
 
 
ESMA PLANS TO PROCEED WITH STRUCTURED PRODUCT TRANSPARENCY RULES
According to a report in Bloomberg, the European Securities and Markets Authority (“ESMA”) is going ahead with proposed requirements that banks reveal profit from margins on securities and that distributors periodically report back to issuers. ESMA is also keeping a provision that allows authorities to remove products from the market that it deems harmful.

In May, ESMA asked the industry to review the proposed rules, which take effect in 2017 and are part of measures to revamp how banks create and sell structured products. ESMA received 330 responses during the consultation period, which ended August 1st, according to its website.  Under the new rules, banks must identify the target market for their products and annually review their policies for handling conflicts of interest.

They must also make extensive cost disclosures for each security they issue, from the amount that goes to hedging risks and distribution to profit margins, according to the document. “Every difference between the price of a position for the firm and the respective price for the client should be disclosed” in the documents investors receive, ESMA wrote.  Banks argued that a breakdown of profit shouldn’t be included since it’s not a cost or a charge. Most respondents also warned against requiring distributors to inform issuers about customer experiences with products, according to ESMA’s report. They said the cost to distributors would outweigh the benefits and even cause some of them to limit the number of issuers they work with.

 
 
GREEK DEBT HELD BY ECB CANNOT BE RESTRUCTURED
According to a Reuter’s article, European Central Bank (“ECB”) member Benoit Coeure stressed that a restructuring of Greek debt held by the ECB would be illegal. As the ECB weighs announcing a Quantitative Easing program ahead of its first policy meeting for 2015, it will be monitoring developments in the Greek parliamentary election which will be held three days later on January 25th.
 
 

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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Washington, DC 20006

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