January 21, 2015 Newsletter
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January 21, 2015
 

SFIG News

SFIG Calendar

Advocacy Outlook

Industry News Highlights

 
SFIG NEWS
THE ABS VEGAS 2015 CONFERENCE IS GOING MOBILE! DETAILS ON HOW TO DOWNLOAD TO FOLLOW SOON
We are excited to announce our new mobile event App dedicated to the ABS Vegas Conference. The new App that will make this year's experience more valuable for our attendees, speakers and sponsors.

This mobile event App provides:

  • Complete schedule of events with the ability to build your own agenda and upload it into your calendar;
  • Detailed speaker information including, bios and presentations;
  • Full attendee list with ability to direct message and share contact information;
  • List of sponsors and related contacts;
  • Interactive maps of the Exhibit Hall and meeting space;
  • Live polling in select sessions and Forums;
  • Notifications of important conference updates;
  • and much more.

Conference Registered Attendees: In order to take advantage of registrant only features (such as access to the attendee list, attendee-to-attendee messaging, sharing of contact information), you must be registered for the conference. Registered attendees will receive log-in details prior to the event.

Just over two weeks are left until ABS Vegas 2015—don’t miss the chance to be part of the largest capital markets conference in the world. Join the more than 4,700 participants registered so far— including more than 2,100 investors and issuers— by registering here. The ABS Vegas agenda can be found here.

 
 
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.
 
 
REMINDER TO REGISTER FOR ABS VEGAS Q&A SESSION WITH THE SEC
The Securities and Exchange Commission (“SEC”) will be holding a Q&A session at SFIG’s ABS Conference in Vegas. The session will cover Regulation AB II and Risk Retention and will take place on Monday, February 9th from 11:00 a.m. – 12:00 p.m. Please note that due to scheduling conflicts, the Tuesday session on Risk Retention has been canceled. Members who originally signed up to attend will automatically be signed up for the Monday joint-session instead.

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 would like to submit a question, please email Mary.Robinson@sfindustry.org (Regulation AB II) or Amanda.Bateman@sfindustry.org (risk retention). SFIG will then share the questions received with the SEC on an anonymous basis. Please note that members of the media will not be permitted to attend these sessions.
 
 
SFIG CALENDAR
BIWEEKLY CREDIT CARD ISSUER COMMITTEE CALL

THURSDAY, January 22, 2015
2:00 p.m. – 3:00 p.m. (EST)

 
 
BIWEEKLY NRSRO DUE DILIGENCE INDUSTRY GUIDE WORKING GROUP CALL

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

 
 
ABCP COMMITTEE CALL REGARDING BSBC-IOSCO HQS COMMENT LETTER

FRIDAY, January 23, 2015
11:00 a.m. – 12:00 p.m. (EST)

 
 
BIWEEKLY EQUIPMENT ISSUER COMMITTEE CALL

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)

 
 
MISMO STRUCTURED FINANCE DEVELOPMENT WORKING GROUP CALL

TUESDAY, January 27, 2015
3:30 p.m. – 5:00 p.m. (EST)

 
 
BIWEEKLY RISK RETENTION INDUSTRY GUIDE WORKING GROUP CALL

TUESDAY, February 3, 2015
11:00 a.m. – 12:00 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

 
 
ABS VEGAS Q&A SESSION WITH THE SEC

MONDAY, February 9, 2015
11:00 a.m. – 12:00 p.m. (PST)
The Aria Resort and Casino
Las Vegas, NV
Please note, there will not be a dial-in provided for this meeting.

 
 
CHINESE SECURITIZATION FORUM 2015 ANNUAL CONFERENCE

TUESDAY, March 24, 2015 – WEDNESDAY, March 25, 2015
JW Marriott Hotel
Beijing, China
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 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 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. 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
PRESIDENT THREATENS TO VETO MEASURES THAT WEAKEN DODD-FRANK, HENSARLING PUSHES BACK
During his State of the Union address last night, President Barack Obama threatened to veto any legislation that would weaken the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”). “We can’t put the security of families at risk by taking away their health insurance, or unraveling the new rules on Wall Street” stated the President. “If a bill comes to my desk that tries to do any of these things, it will earn my veto.”

“If the president is really concerned there is too much risk in the financial system, then clearly Dodd-Frank isn’t working as he intended…so let’s cooperate on reforms that will work to make our financial system more stable without hurting those on Main Street who had absolutely nothing to do with causing the financial crisis,” stated Congressman Hensarling (R-TX), Chairman of the Committee on Financial Services, in response.

Despite the veto threat, in the past two months, the President signed both the omnibus appropriations bill and the terrorism risk insurance reauthorization into law that contained changes to Dodd-Frank.
 
 
FOURTH QUARTER SETS POST-CRISIS RECORD FOR JUMBO RMBS ISSUANCE; 2014 VOLUME DOWN
According to an article in Housingwire, the last three months of 2014 saw more prime jumbo residential mortgage-backed securitizations (“RMBS”) issued than in any quarter since the financial crisis began. There were 11 prime jumbo RMBS in the fourth quarter of 2014, citing a report released by Fitch Ratings. However, the report also referred to 2014 issuance as “glacial by historical standards.” The total issuance volume in 2014 was only $8.6 billion compared to $13.1 billion in 2013. According to Fitch’s data, there were $474 billion worth of jumbo RMBS deals issued from 2005-2008. Since 2010, the total issuance is $26.1 billion. Fitch was hopeful that volume would continue to increase as new and more issuers are coming to market—in 2014 six issuers came to market with new deals.
 
 
BUREAUCRACY BLAMED FOR HINDERING ECB’S ABS PURCHASE PROGRAM
As SFIG reported on January 7th, the European Central Bank’s (“ECB”) attempt to stimulate the European (“EU”) economy through the purchase of asset-backed securities (“ABS”) has continued to underwhelm investors since it launched eight weeks ago, with only €2.12 billion of debt acquired to date. According to a recent report by Bloomberg News, however, the reason for the slow progress is due to bureaucracy and paperwork. As it reported on January 19th, it takes as long as five days for ECB officials to approve purchases and is further exacerbated by the lengthy documents detailing the investment case for each bond required to be compiled by asset managers hired to buy the debt.

The slow and underwhelming progress has led some to speculate that ECB President Mario Draghi will initiate a quantitative easing program buying government bonds when the bank’s Governing Council meets on Thursday in Germany. However, some argue such a move could further stunt the bond purchasing program’s effectiveness given the lower price of purchases.
 
 
HOUSE FINANCIAL SERVICES COMMITTEE TO EXAMINE RISK RETENTION, HOUSING FINANCE, CAPITAL AND LIQUIDITY RULES AS PART OF OVERSIGHT PLAN
This morning, the Committee on Financial Services (“Committee”) of the House of Representatives approved its oversight plan for the 114th Congress. Specifically, the plan details the issues that the Committee plans to explore over the next two years, and includes the following items important to the securitization and structured finance industry:

  • Securitization and Risk Retention: The Committee will monitor the implementation of joint agency risk retention rule-making mandated by Section 941 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”).
  • Capital Standards and Basel III: The Committee will explore bank capital and liquidity, and in so doing, examine the guidelines developed by the Basel Committee on Banking Supervision and how domestic financial regulators are either implementing or planning to implement those guidelines in the United States.
  • Volcker Rule: The Committee will examine financial regulators’ implementation of Section 619 of Dodd-Frank, knowns as the “Volcker Rule,” and its effect on the strength and international competitiveness of U.S. capital markets.
  • Regulatory Burden Reduction: The Committee will review the current regulatory burden on financial institutions, with a goal of reducing unnecessary, duplicative, or overly burdensome regulations.
  • Covered Bonds: The Committee will examine the potential for covered bonds to increase mortgage and broader asset class financing, improve underwriting standards and strengthen U.S. financial institutions.
  • Housing Finance Reform: The Committee will examine proposals to modify or terminate Fannie Mae and Freddie Mac’s statutory charters, harmonize their business operations and wind down any legacy business commitments, including oversight of the Federal Housing Finance Agency. The Committee will further examine the proper role of the Federal Housing Administration in the mortgage finance system.
The Committee will also oversee general implementation of Dodd-Frank, including the proper roles, responsibilities and transparency levels for the Financial Stability Oversight Council, the Office of Financial Research and the Consumer Financial Protection Bureau.
 
 
CMBS DELINQUENCY RATE AT 5-YEAR LOW, MAY RISE IN 2015
According to an article in Scotsman Guide, the delinquency rate for commercial mortgage-backed securities (“CMBS”) dropped to a five-year low at the end of 2014, but the delinquency rate may rise slightly in 2015 as crisis-era loans begin to mature. The CMBS delinquency rate in December 2014 was 5.75 percent, 168 basis points lower than at the beginning of the year. The article stated, citing the Wall Street Journal, that 2014 ended with $94 billion in CMBS issuances.

In 2015, delinquencies may increase as loans made between 2005 and 2007, which were underwritten more loosely, will begin to mature. However, one analyst stated that concerns about delinquencies in 2015 are “probably overblown—at least concerns over mass delinquencies.” He stated that more loans will mature in 2016 and 2017.
 
 
PRESIDENT RELEASES TAX REFORM PROPOSALS, CALLS FOR BANK TAX
Last Friday, President Barack Obama called for comprehensive tax reform as “middle class families today bear too much of the tax burden because of unfair loopholes that are only available to the wealthy and big corporations.” The President, in his State of the Union address last night, indicated that he wants to work with Congress to simplify the tax code for individuals, and pay for it through levying the following taxes:

  1. Imposing a fee on the largest financial institutions: The President would levy a seven basis point fee on the liabilities of roughly 100 of the largest U.S. financial institutions with assets over $50 billion.
  2. Increasing the top capital gains and dividend rate: The President has proposed an increase the top capital gains and dividend rate to 28 percent from the current rate of 25 percent, while expanding the number of people subject to the tax to those households with a combined income of $500,000 and above.
  3. Removing the “stepped up” basis for capital gains: This provision would be removed so that any inheritance would be subject to a capital gains tax.

“Let’s close loopholes so we stop rewarding companies that keep profits abroad, and reward those that invest in America,” stated the President.

“No amount of White House spin can hide the fact that President Obama’s plan is nothing more than a tax on mortgage loans, car loans and small business loans. Consumers will find it harder and more expensive to buy cars, homes, major appliances, save for college or start a small business,” stated Jeb Hensarling (R-TX), Chairman of the Committee on Financial Services, in response.

The President will include the details of his comprehensive tax reform plans when he releases his 2015 budget plan in February.
 
 
SENATORS HATCH AND WYDEN LAUNCH BIPARTISAN FINANCE COMMITTEE TAX REFORM WORKING GROUPS, HOUSE DEMS BACK FINANCIAL TRANSACTIONS TAX
Last week, Senate Finance Committee chairman Orrin Hatch (R-UT) and ranking member Ron Wyden (D-OR) announced the launch of five separate bipartisan Finance Committee Tax Working Groups to spur comprehensive tax reform efforts this Congress. The groups will analyze current tax law and examine policy trade-offs and available reform options. The five working groups will be chaired by at least one republican and one democrat, including:

  1. Individual Income Tax: Senators Chuck Grassley (R-IA), Mike Enzi (R-WY) and Debbie Stabenow (D-MI)
  2. Business Income Tax: Senators John Thune (R-SD) and Ben Cardin (D-MD)
  3. Savings and Investment: Senators Mike Crapo (R-ID) and Sherrod Brown (D-OH)
  4. International Tax: Senators Rob Portman (R-OH) and Chuck Schumer (D-NY)
  5. Community Development & Infrastructure: Senators Dean Heller (R-NV) and Michael Bennett (D-CO)
Each of the bipartisan groups will work with the nonpartisan Joint Committee on Taxation to produce an analysis of options and potential legislative solutions within their assigned areas, with the goal of creating one comprehensive report containing recommendations for the development of bipartisan tax reform legislation. The report is expected to be produced in May. Of importance to structured finance, House Ways & Means Ranking Member Chris Van Hollen, proposed a “tax” on financial transactions in order to pay for individual tax reductions for the poor and middle class.
 
 
CHINA MULLS GREEN SECTOR ASSET-BACKED SECURITIES
According to a recent Reuters’ report, China's banking regulator is considering the launch of asset-backed securities (“ABS”) based on loans to "green" industries, a spokesman said at a press conference in Beijing on Monday. China is expanding asset securitization on an unprecedented scale as the government looks to increase liquidity without expanding the money supply.

Ye Yanfei, an official at the China Banking Regulatory Commission, did not provide a launch date. The country's banking regulator started to manage issuance of ABS through a registration system in November, simplifying the process.
 
 
FSOC REVIEWS RISKS POSED BY LEVERAGED LENDING, SIFI DESIGNATION PROCESS AHEAD OF 2015 ANNUAL REPORT
Today, the Financial Stability Oversight Council (“FSOC”) met for open and closed sessions which included a discussion of their upcoming 2015 Annual Report and leveraged lending during the executive session and an update on benchmark reform efforts and the process for designating nonbank financial institutions as systemically important during the open session. The discussion on leveraged lending comes after the Federal Deposit Insurance Corporation, Federal Reserve and Office of the Comptroller of the Currency issued a list of frequently asked questions for implementing their March 2013 Interagency Guidance on Leveraged Lending, which the agencies say “are designed to foster industry and examiner understanding of the guidance and supervisory expectations for safe and sound underwriting and to promote consistent application of the guidance.” With leveraged lending on the rise and a perception that market participants have largely ignored this guidance, FSOC is expected to make this area a priority in 2015.
 
 
MORTGAGE AND BANK CARD DEFAULT RATES EDGE UP IN DECEMBER 2014
According to a Standard & Poor’s/Experian Consumer Credit Default Indices Report, the national composite default rate for mortgages edged higher to 1.11 percent in December 2014, up from 1.07 percent in November 2014, but still down substantially from the 1.35 percent reported for December 2013. The same report stated that the bank card default rate was 2.65 percent in December 2014, up from 2.59 percent in November, but down from the 2.98 percent reported in December 2013. Auto loan default rates were down to 1.02 percent from November 2014 and down from 1.12 percent year-over-year.
 
 

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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