June 17, 2015 Newsletter
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June 17, 2015


SFIG Calendar

Advocacy Outlook

Industry News Highlights

Upcoming Events in Washington


SFIG staff joins several SFIG members at IMN's Global ABS 2015 Conference this week, June 16th through June 18th. In addition to multiple meetings with key European market participants and regulators, Richard Johns, SFIG Executive Director, participated on a panel entitled: “Qualifying Securitization: Digesting the Alphabet Soup of HQS/SST/STC & STS.” The panel focused on the potential implications of a High Quality Securitization ("HQS") framework, particularly given the need for global consistency.

Please visit SFIG’s HQS advocacy page to learn more about this subject. If you are interested in joining the HQS Task Force, please contact Amanda.Bateman@sfindustry.org


On Friday, June 12th, SFIG released its Industry Guide on the Nationally Recognized Statistical Rating Organizations (“NRSRO”) Due Diligence rules.

SFIG's Industry Guide initiative seeks to contribute to market openness and transparency through a series of guides that reflect “general consensus” opinions of members interested in those particular regulatory rulemakings.

Over the last several months, the SFIG NRSRO Due Diligence Working Group, including, but not limited to, lawyers, accountants, trustees, issuers, and underwriters, have worked together to define a consistent approach to the due diligence sections of the Securities and Exchange Commission’s (“SEC”) August NRSRO rules. This group focused particularly on Third-Party Due Diligence for Asset-Backed Securities, including new rules 15Ga-2, Rule 17g-10, revised Form ABS-15G, and Form ABS Due Diligence-15E. These rules went into operation on Monday, June 15th.

Created under the chairmanship of Amanda Baker and Jan Stewart, both of Mayer Brown, the views set forth in the Industry Guide do not constitute legal advice but instead reflect industry views and consensus positions on the questions presented based on various resources and numerous group discussions. All of the views set forth in the Industry Guide are subject to change as market practices develop and/or if additional guidance from the SEC and its staff becomes available. While presented as a consensus, we would highlight that the guide does not purport to represent that all viewpoints have been universally adopted by every SFIG member.

Please contact Sairah.Burki@sfindustry.org or Amanda.Bateman@sfindustry.org with any questions.


Our symposium scheduled for Tuesday, June 23rd has been postponed. The symposium will be rescheduled for a later date in October. Please stay tuned for updates and announcements in newsletters later this summer.

TUESDAY, June 16, 2015 – THURSDAY, June 18, 2015
The Barcelona International Convention Centre
Barcelona, Spain
Registration is available here.
THURSDAY, June 18, 2015
9:00 a.m. – 10:00 a.m. (ET)
THURSDAY, June 18, 2015
10:00 a.m. – 11:00 a.m. (ET)
THURSDAY, June 25, 2015
10:00 a.m. – 11:00 a.m. (ET)
FRIDAY, June 19, 2015
12:00 p.m. – 1:00 p.m. (ET)
WEDNESDAY, June 24, 2015
2:00 p.m. – 3:00 p.m. (ET)
WEDNESDAY, June 24, 2015
12:00 – 5:00 p.m. (ET)
Deloitte & Touche LLP
30 Rockefeller Plaza
New York, NY 10112
Note: Closed Meeting
WEDNESDAY, September 16, 2015 – FRIDAY, September 18, 2015
The Fontainebleau
Miami Beach, FL
Registration is available here.

If you would like to participate in the work SFIG is undertaking through our committees as highlighted below, please e-mail Committees@sfindustry.org. For specific inquiries on any of SFIG’s advocacy efforts, please contact the staff member listed for the related project.

The RMBS 3.0 Task Force released its Second Edition RMBS 3.0 Green Paper in November. Following the successful SFIG/IMN Private Label RMBS Symposium, the task force will continue its efforts to address key issues specific to private label mortgage securities through work streams relating to (1) Representations, Warranties, and Repurchase Enforcement; (2) Due Diligence, Data, and Loan-Level Disclosure; and (3) Role of Transaction Parties and Bondholder Communications. Presently, the task force is working on (1) developing a comprehensive compilation of representations and warranties for release in the spring of 2015 and (2) a grid summarizing roles of transaction parties. We encourage members to participate in any or all of the working groups to contribute towards the mission of RMBS 3.0.

For additional information on RMBS 3.0, or to join the task force, please contact Mary.Robinson@sfindustry.org.

The GSE Reform Task Force is reviewing the FHFA’s update to the single security initiative this Friday and will respond as necessary. The task force has also formed policy positions on the Carney-Delaney-Himes GSE Reform bill and updated its briefing book to support its advocacy efforts. With the release of the bill, SFIG staff also updated its GSE Reform Legislative Comparison, which analyzes key provisions in the five most recent housing finance reform bills including the Johnson-Crapo bill and the PATH Act. SFIG staff previously summarized members’ recommendations on the former in a briefing book, and plan to produce a similar book on the latter in the upcoming months. Additionally, the task force has been actively engaging the Federal Housing Finance Agency on several fronts, with comments submitted on its single security proposal, guarantee fee pricing and Strategic Plan for 2015-2019.

To join SFIG’s GSE Reform Task Force and learn more, please contact Amanda.Bateman@sfindustry.org.

The Mortgage Loan-Level Disclosure Task Force is studying the recent Regulation AB II release of Schedule AL and comparing it to SFIG’s Schedule L submission to the Securities and Exchange Commission in February of 2014. SFIG also continues to have weekly Mortgage Industry Standards Maintenance Organization calls to go through data elements that lenders should deliver in securitizations. We will also be conducting an analysis of the data elements included in SFIG’s Schedule L submission in order to determine any privacy concerns.

Please contact Alyssa.Acevedo@sfindustry.org for additional information on SFIG’s work on this topic.

The Volcker Task Force has been working with SFIG’s various asset class and legal counsel committees to identify areas within the Volcker Rule in need of clarification, particularly questions regarding covered funds and the loan securitization exemption.

Please contact Amanda.Bateman@sfindustry.org to participate on the Task Force.

The Risk Retention Industry Guide Work stream is creating best practices and developing consensus positions around several areas within the Credit Risk Retention final rule.

Please contact Alyssa.Acevedo@sfindustry.org with any questions.

SFIG’s Chinese Market Committee continues to hold discussions with a focus on SFIG’s partnership with the Chinese Securitization Forum, potential upcoming educational discussions and the sharing of recent market developments in China.

If you would like more information on SFIG’s work with respect to Chinese securitization, please contact Alyssa.Acevedo@sfindustry.org.

SFIG’s Shadow Banking Task Force has established the following agenda:

  • Leverage the predictive powers of the G20’s shadow banking initiative to determine future SFIG advocacy initiatives
  • Assess the level of regulation to which our members are already subject
  • Measure the full impact of those regulations on lending decisions and business models
  • Provide input into IOSCO, BCBS and IAIS on the revitalization of securitization markets

The task force will have its first full meeting in the coming weeks, and members from across asset classes are encouraged to participate.

To register your interest in SFIG’s Shadow Banking Initiative, please contact Amanda.Bateman@sfindustry.org.

The Regulation AB II Task Force will focus on the disclosure and offering process requirements within the final rule. Two work streams have been formed to develop a comment letter on the proposed rules that remain outstanding and to produce an industry guide for critical elements of the final rule.

SFIG members who are interested in joining this task force or asset specific committees should contact Alyssa.Acevedo@sfindustry.org.

The Regulatory Capital and Liquidity Committee is addressing industry concerns related to the Federal Reserve Board’s Final Rule on the Liquidity Coverage Ratio (“LCR”). This committee will also develop a comment letter when U.S. regulators release their proposed Net Stable Funding Ratio (“NSFR”).

To become involved in SFIG’s advocacy on the Final LCR rule or NSFR, please contact Alyssa.Acevedo@sfindustry.org.

The Derivatives in Securitization Task Force recently obtained no-action relief from the CFTC giving swap dealers comfort that the CFTC would not take enforcement action against swap dealers that did not comply with certain CFTC Regulations when taking actions in response to the credit ratings downgrade of a counterparty to a legacy swap. The relief applies to swaps with SPVs that were in existence prior to October 10, 2013. The task force also commented on the CFTC’s proposal on margin requirements for uncleared swaps, as well as the prudential regulators’ proposal regarding margin and capital requirements for covered swap entities.

SFIG members who are interested in learning more about this initiative should email Amanda.Bateman@sfindustry.org.

The Money Market Fund Reform Working Group submitted a comment letter on October 13, 2014 regarding the Securities and Exchange Commission’s July 23, 2014 proposal which includes, among other things, possibly amending rule 2a-7’s issuer diversification provisions to eliminate an exclusion that is currently available for securities subject to a guarantee issued by a non-controlled person. SFIG also submitted a comment letter in September 2013 on Money Market Fund Reform.

If you are interested in joining this working group, please contact Alyssa.Acevedo@sfindustry.org.

The High Quality Securitization ("HQS”) Task Force responded to the European Commission’s consultation on an EU framework for simple, transparent and standardized securitization on May 12, 2015. The task force also previously responded to the BCBS-IOSCO consultation on its criteria for identifying simple, transparent and comparable securitizations. SFIG’s comments were built off of those sent to the European Banking Authority on January 14th (available here) regarding its proposed criteria and to the European Central Bank and Bank of England last summer (available here) regarding the development of a sustainable securitization market in Europe.

To join the HQS Task Force, please contact Amanda.Bateman@sfindustry.org.


According to a recent Financial Times article, industry participants traveling to Barcelona, Spain for Global ABS this week will have a lot to say about the prohibitive effect capital rules are having on investment in the European securitization market. Banks and insurance companies are dissuaded from buying securitizations due to the punitively high level of capital they must hold against them, according to Jean Dornhofer, a senior vice-president at Moody’s and author of a recent report that outlines these investor concerns. According to Dornhofer, “The market’s growth depends on the arrival of more bank investors… Investors desired change in the capital framework for banks that hold structured finance instruments, which could create more liquidity in the market.”

While the European Central Bank (“ECB”) has tried to encourage the revival of securitization markets through its ABS purchasing program, the Financial Times notes that this effort has been unsuccessful, owed in part to the fact that the central bank has bought far more covered bonds. While the European Commission indicated last week that it is seeking to lower capital requirements for high quality securitization (see SFIG’s article on this topic here), the Financial Times article posits that banks’ access to cheaper funding from the ECB, as well as continued post-crisis reputational issues, will continue to hamper the return of the securitization market even if the capital burden is lightened.


The U.S. Securities and Exchange Commission (“SEC”) is considering allowing CLO funds issued before December 24, 2014 to refinance tranches without having to comply with the recently finalized risk retention rules that take effect in December of 2016, according to a recent Reuters article. Currently, the final risk retention rules require CLO managers to maintain a financial interest in their investment vehicles of 5 percent.

The potential rule concession would benefit deals completed before 2015. It is not expected to apply to CLOs that were issued during the two years before the regulation takes effect on December 24, 2016, Reuter’s sources indicated. Managers of CLOs issued after December 24, 2014 who select to refinance more than two years later may have to comply with the rules and hold 5 percent of the refinanced tranche.

In addition to the SEC, the Federal Reserve and the Office of the Comptroller of the Currency have also been consulted about the potential decision, which could be released soon in the form of a no-action letter, according to Reuter’s sources.


As reported by Bloomberg last Thursday, June 11th, yield premiums on top-rated slices of certain types of CLOs are widening significantly as July draws near. This is due to the fact that after July 21st, banks will no longer be able to hold these CLOs because of the implementation of the Volcker Rule. According to Bloomberg, which cites an industry report on the topic, yields over benchmark rates on AAA-rated CLOs issued before the crisis climbed to 1.2-1.5 percentage points, up from a range of 0.8-1.15 percentage points early in May. However, CLOs that banks are not required to divest under the rule’s provisions remain “relatively stable” according to Deutsche Bank analyst Bjarni Torfason.

The Volcker Rule aims to limit short-term trading by banks by prohibiting lenders’ investments in private equity funds. CLOs that include bonds, instead of exclusively loans, may no longer be held by banks after July 21st as a result. However, in April 2014, the Federal Reserve granted two additional one-year extensions beyond that point until 2017 for CLOs held by banks as of 2013.


According to a recent American Banker article, several regulators are beginning to question whether the cumulative effect of new rules authorized under the Dodd-Frank Act and whether these could pose systemic risk on the secondary market.

Office of Financial Research Director Richard Berner stated last week that the financial reform law and related regulations could be "contributing to more permanent adjustments that could impair market functioning,” including the reduction in market liquidity.

Kevin Walsh, Deputy Comptroller for Market Risk at the Office of the Comptroller of Currency, said that his office has observed changes in market structure and is concerned about the effect of illiquid secondary markets in a crisis.

"Issuance and appetite to purchase new capital markets instruments across all different asset classes… seems very robust," Walsh said. "The issue that we need to think about with the [liquidity coverage ratio], swap margin rule and Volcker… is secondary market liquidity. They are very different things."


Start-ups in marketplace lending, also known as peer-to-peer lending (“P2P”), are leveraging securitization to sell student loan asset-backed securities (“SLABS”) to investors, according to an article in Business Insider. Federal estimates are in the $1.2 trillion to $1.3 trillion range for the amount of debt the government has issued to students.

According to the article, P2P companies’ SLABS offerings tend to stand out as the debt originates from high-quality borrowers with high credit scores and top educational credentials. Business Insider states, “CommonBond CEO David Klein points out that his average customer has a credit score north of 760 and makes $140,000 a year.” SLABS will continue to become more attractive to potential investors with offerings beginning to get investment-grade ratings.


An improvement in commercial asset performance and new capital sources are driving an increase in commercial real estate lending, according to an article in Investor’s Business Daily. “Commercial real estate mortgages show relatively low delinquency, and risk-adjusted yields for commercial mortgage debt are quite attractive to many investors,” said Brian Stoffers of the CBRE Group. New capital sources include banks, insurance companies, pension funds, private equity and real estate investment trusts. “There’s lots of equity buying property and an active purchasing market,” Stoffers said. “That means there’s an active lending market.” 


Following the recent release of new private mortgage insurance (“PMI”) requirements, more PMI providers are gaining interest in providing deep coverage on government-sponsored enterprise (“GSE”) loans—theoretically up to coverage on 45 percent of property value with a 5 percent down payment, or 30 percent in the case of a 20 percent down payment. As opposed to traditional PMI coverage, deep coverage offers investors protection against a larger proportion of the losses in the event of a mortgage default. Deep coverage PMI could help the GSEs better disperse their overall risk exposure at a time when the Federal Housing Finance Agency and lawmakers are pushing for more GSE risk-sharing.


THURSDAY, June 18, 2015
10:00 a.m. – 4:00 p.m. (CT)
CenturyLink Center Omaha
455 N. 10th Street
Omaha, NE 68102
Registration is available here


SFIG has a number of Committees and Task Forces meeting and working on many topics of interest to the securitization industry. Please email us for more information, including how to join.

SFIG is pleased to share this edition of its newsletter with our members, as well as our supporters in the structured finance community. To ensure that you receive future editions of the newsletter, please visit our website or email us to learn more about membership opportunities.

Contact Information

Richard Johns Executive Director

Kristi Leo Investor Relations

Sairah Burki Director of ABS Policy

Michael Flood Director of Advocacy

Mary Robinson Policy Manager

Alyssa Acevedo Policy Analyst

Amanda Bateman Policy Analyst

Daniel Tees Policy Analyst

Jennifer Serpas Office Manager

Allison Creswell Executive Administration

1775 Pennsylvania Ave. NW
Suite 625
Washington, DC 20006

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