June 19, 2013 Newsletter
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Structured Finance Industry Group


Issue Spotlight

Recent Developments



On June 13, 2013 SFIG representatives met with staff members from the Consumer Financial Protection Bureau (CFPB).  Attending the meeting from the CFPB were Peter Carroll, Assistant Director of the Office of Mortgage Markets; Dan Smith, Assistant Director of the Office of Financial Institutions and Business Liaison; and Ron Borzekowski, Supervisory Economist of the Office of Research.

The primary purpose of the meeting was to raise SFIG members’ concerns regarding the impact of the CFPB’s Ability-to-Repay/Qualified Mortgage (ATR/QM) rule on the re-emergence of the private label RMBS market. During the discussions, SFIG representatives placed special emphasis on the way that credit rating agencies (CRAs) were evaluating the impact of the ATR/QM rule in their loss severity modeling.

The CRA representatives attending the meeting were in general agreement with each other that the level of legal uncertainty surrounding the ATR/QM determinations under the new rule would likely lead to challenges of the ability-to-repay requirements, resulting in increased legal costs that in turn would increase loss severity assumptions.

If you are interested in participating in discussions relating to the ATR/QM rule, please contact SFIG at Richard.Johns@sfindustry.org.

Click here for the ATR/QM rule.  Click here for a recent “RMBS Commentary” article from Morningstar Credit Ratings LLC on the impact of the ATR/QM rule on loss severity. 




SFIG has proposed to form a Task Force for the purpose of submitting comments on the Basel Committee on Banking Supervision’s (BCBS) March 2013 Consultative Paper (Consultative Paper) on the Supervisory Framework for Measuring and Controlling Large Exposures.  The deadline for submitting comments is June 28, 2013.

The Consultative Paper requires all banks subject to the BCBS risk-based capital rules to report all aggregated “large exposures” to a related group of counterparties and imposes a hard limit on the amount of such exposures. Large exposures are defined as exposures that are 5% or more of either total Tier 1 Capital or total common equity Tier 1 Capital (BCBS is consulting on this point). Almost all counterparty exposure is subject to the proposed framework, including off-balance sheet commitments such as securitizations.  Sovereign, central bank and public sector entity exposures would be excluded.  Total combined “large exposures” would be subject to a cap of 25% of total Tier 1 Capital or total common equity Tier 1 Capital.

A “look-through approach” (LTA) would potentially apply to the assets underlying a securitization. A “granularity test” is first applied to determine the LTA should apply to the securitization. BCBS proposes that a transaction is sufficiently granular if its largest underlying exposure does not exceed 1% of the total transaction value. If the granularity test is passed and no asset exceeds 1% of the transaction, the securitization vehicle or other collective investment vehicle is treated as the exposure counterparty.  If the granularity test is not passed, the LTA is applied and the amount of each underlying exposure is added to any other exposures to the same group of counterparties for determining compliance with the large exposure limit.  So, if the granularity test is failed (which would be the case for all CMBS, for example) the LTA would require the bank to look at each underlying asset in the transaction as an exposure to the underlying borrower or counterparty.

BCBS recognizes that the LTA may not always be feasible because it may not be possible to identify the counterparty of each underlying exposure. In those instances, BCBS proposes aggregating each unidentified exposure as a single “unknown client” exposure that would itself be subject to reporting and the large exposure limit.

Banks are also required to assess possible additional risks (e.g. fraud or guarantor credit risk) that do not relate to the underlying assets of a transaction.  In circumstances where the identity of a third party imposes additional risks, the third party would be treated as an additional counterparty and the exposure amount would equal the amount of the bank’s investment. Securitization examples given of such third party exposure are liquidity providers, sponsors of ABCP programs and credit protection sellers to synthetic structures.  Multiple third parties could be considered sources of these risks, in which case the full amount of the investment exposure would be assigned to each of these exposures, regardless of the double counting effect.

SFIG has engaged Chapman and Cutler as drafting counsel.

Click here for the Consultative Paper.

Please contact SFIG at Richard.Johns@sfindustry.org if you would like to be involved with this Task Force.



A reform bill targeted at the two government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, is being developed by U.S. Senators Bob Corker (R-TN) and Mark Warner (D-VA). The bipartisan legislative collaboration is a significant development in the GSE reform debate since the two Senators are influential senior members of the Senate Banking Committee.  In addition, recent press reports indicate that the Obama Administration has reviewed drafts of the proposal and is providing technical and legal guidance to the Senators. The Administration’s involvement is not a guarantee of its endorsement of the legislation, but it is a good sign that the bill will end up somewhere in the Administration’s comfort zone.

The draft legislation has not been formally introduced, but a draft is in circulation. The current draft would replace the Federal Housing Finance Agency (FHFA), Fannie Mae and Freddie Mac with a new entity, the Federal Mortgage Insurance Corporation (“FMIC”).  In addition to the private bond insurers envisioned by the bill, the FMIC would provide insurance on eligible issuances of mortgage-backed securities, and would also serve as a general regulator of entities involved in the issuance of such insured securities.  A cooperative subsidiary of the FMIC would provide a securitization platform for small to mid-sized originators.  As a federal credit guaranty supports the corporate debt obligations and the guarantees issued by Fannie Mae and Freddie Mac, the FMIC proposal is a significant departure from the status quo.  Only the new entity’s mortgage-backed securities issuances would be backed by the full faith and credit of the United States.

Notably, the FMIC would not be equipped to maintain portfolios of whole loans or mortgage-backed securities (as Fannie Mae and Freddie Mac are able to do). 

Background on GSE Reform

Discussions and commentary relating to the “reform” of the two GSEs have been ongoing for years, if not decades.  The pace of the discussions has accelerated since the two GSEs were placed in conservatorship by their regulator, the FHFA, on September 6, 2008.  The U.S. House of Representatives’ Financial Services Committee, in particular, has held numerous hearings and considered numerous pieces of legislation over the past five years.  Until now, the Senate has not been particularly active in pursuing GSE reform.  In February 2011, the Obama Administration (through the U.S. Department of the Treasury and the U.S. Department of Housing and Urban Development) released a “white paper” on “Reforming America’s Housing Finance Market,” which presented three possible options for GSE reform.  The white paper did not generate much in the way of follow-up.

The essence of the debate revolves around the degree, if any, to which federal credit should be used to support the mortgage and housing markets, as well as the nature and form of such support and the terms and conditions related to any such federal credit support.  The issues relating to GSE reform also tend to merge into other initiatives and developments in the housing finance space, including covered bonds, the mortgage interest deduction, the role of rental housing, MERS, and the definitions of “qualified mortgage” and “qualified residential mortgage.”

Almost all commenters agree that the current level (usually estimated to be in excess of 90% of the market) of federal credit support for single-family housing, provided through the GSEs, Ginnie Mae, the Federal Housing Administration, the Veterans Administration and other programs, is both unhealthy and unsustainable, and that more private capital must be deployed and put at risk.

Another factor that may influence the direction of GSE reform efforts is the recent news that Fannie Mae and Freddie Mac have become profitable, and in fact have posted record profits in the most recent reporting quarter.  As a result, of the $187 billion injected into the two GSEs by the U.S. Department of the Treasury (Treasury) during their conservatorship, $132 billion has been returned to Treasury.  At some point in the next several quarters, the entire amount injected may be returned.

The circumstances surrounding the imposition of the conservatorship have attracted some controversy (see the item “Fannie and Freddie Shareholders File Suit Challenging Conservatorship” under the “Recent Developments” section below), as have the mechanics of the Treasury’s investment in the GSEs.  Specifically, the Treasury’s investment took the form of a preferred stock investment in each GSE.  As presently constructed, that arrangement essentially requires Fannie Mae and Freddie Mac to pay over to the Treasury all of their profits.  These amounts, however, are paid as dividends, and do not amortize the preferred stock.  As some commenters have noted, this arrangement precludes the GSEs from building up reserves that might, at some point, return them to an adequate level of capitalization to sustain the guarantee component of their businesses.

Other commenters have observed that the combination of GSE profitability and the mechanics of the preferred stock arrangement may make a substantial contribution towards reducing the current deficit being posted by the federal government, with an associated impact on the debate regarding the federal government’s finances more generally.  These commenters infer that this situation, if it were to continue, could reduce the pressure promptly to pursue GSE reform.

Finally, the FHFA has been undertaking a variety of steps to implement various initiatives.  These initiatives include (i) a “risk-sharing” initiative, in which a portion of the GSEs’ risk on their guarantees is assumed by private investors, and (ii) the “single securitization platform” initiative, undertaken to combine certain functions that are common to both Fannie Mae and Freddie Mac. The latter initiative could result in placing those functions in a stand-alone entity that may ultimately serve non-GSE market participants as well.

The Proposed Legislation

Senators Corker and Warner’s proposed piece of legislation is called the “Secondary Mortgage Market Reform and Taxpayer Protection Act of 2013” (Proposed Bill).  The Proposed Bill has yet to be introduced in the Senate, and is likely to undergo revisions both before and after it is actually introduced. 

Insuring Covered Securities

The centerpiece of the Proposed Bill is the creation of the FMIC.  As its name suggests, the primary function of the FMIC would be to provide an explicit guaranty to the 80% loan to value level (as the GSEs do today) for “covered securities” (Covered Securities) which are mortgage-backed securities:

  • collateralized by “eligible mortgages,”
  • issued subject to a standard form risk-sharing mechanism, product, structure, contract or other securitization agreement developed by the FMIC; and
  • issued by an “approved issuer” and eligible for the FMIC’s insurance.

Eligible Mortgages would be mortgages on single-family (one-to-four family) housing units that comply with the Consumer Financial Protection Bureau’s ability-to-repay/qualified mortgage rule (Eligible Mortgages).  Eligible Mortgages would be subject to maximum loan limits, which the Proposed Bill stipulates cannot exceed $625,000 (for a one-unit home) in the first year following the Proposed Bill’s enactment, and which would reduce annually over a six-year period, with $417,000 being the maximum for a one-unit home in the sixth year following enactment. 

Each Eligible Mortgage would require mortgage insurance if the loan to value ratio is above 80%, and must have a downpayment of at least 5%.

The Proposed Bill provides the following guidance about what will be required of the “standard form risk-sharing mechanisms” (Risk-Sharing Mechanisms) necessary for a mortgage-backed security issuance to be a Covered Security:

  • there would be a first loss position held by private investors;
  • the first loss position must be adequate to cover losses that might be incurred as a result of adverse economic conditions generally consistent with the economic conditions observed in the U.S. during moderate to severe recessions experienced during the last 100 years, including national home price declines; and
  • the first loss position must be at least 10% of the principal or face value of the Covered Security.

The FMIC would be given five years to develop and implement the Risk-Sharing Mechanisms.  The Risk-Sharing Mechanisms could include senior-subordinated and credit-linked structures “and the use of regulated insurers with sufficient equity capital to absorb losses associated with moderate or severe economic downturns.”  The Proposed Bill specifically directs the FMIC to consider how any Risk-Sharing Mechanism would interact with the “To-Be-Announced” (TBA) market.

The Proposed Bill would require the FMIC to approve, and maintain lists of bond guarantors (Approved Guarantors), issuers permitted to issue Covered Securities (Approved Issuers), as well as approved servicers (Approved Servicers) and approved private mortgage insurers (Approved PMI Providers).

Notably, if bond insurance is used as the Risk Sharing Mechanism, the related Approved Guarantor would be required to hold at least 10% capital against the entire value of the related Covered Securities. 

Approved Issuers could include conduit aggregators and Federal Home Loan Banks.  At least one Approved Issuer must be dedicated to servicing the securitization needs of credit unions and community banks without securitization expertise, a role most likely occupied by a FMIC subsidiary that would be cooperatively owned.  No single Approved Issuer would be allowed to have a share of the Covered Security market in excess of 15%.

An Approved PMI Provider would be precluded from issuing both loan-level mortgage insurance and security-level insurance to the private market holders of the first loss positions.  The Proposed Bill requires that an Approved PMI Provider provide insurance on any Eligible Mortgage with a loan to value ratio in excess of 80%.

The FMIC would be required to establish a mortgage insurance fund (MIF) to be funded with the fees charged for providing insurance on the Covered Securities.  The MIF would be subject to a minimum balance requirement of 2.5% of the aggregate outstanding principal balance of the insured Covered Securities.  As a result, when combined with the related Risk-Sharing Mechanism, the total private capital held would be brought to the level of 12.5% of outstanding unpaid principal balances.  The insurance fees to be charged must be set at a uniform level, and cannot vary based upon geography or the size of institution to which the fee is charged.

The amounts on deposit in the MIF must be invested in obligations of the United States.  The MIF funds specifically cannot be invested in Covered Securities.  The MIF funds would be used to honor claims on the insurance.  Additionally, the full faith and credit of the United States would be pledged to the payment of all amounts due from the MIF.

The FMIC would be precluded from participating in the mortgage origination business.

The Wind Down of Fannie Mae and Freddie Mac

The Proposed Bill would require that the FMIC’s board of directors, not later than five years after the enactment of the Proposed Bill, certify (Certification) that the FMIC is operational and able to perform its insurance functions for Covered Securities.

Following the Certification, Fannie Mae and Freddie Mac would be precluded from conducting new business, their charters would be revoked, and they would be terminated.  The Proposed Bill would allow any assets of the GSEs, such as intellectual property platforms or “any other object or service” to be transferred to the FMIC at no cost, if the FMIC considers such assets necessary to facilitate the FMIC’s role in the securitization activities of credit unions and community banks.

Further, all personnel and ongoing initiatives of the FHFA (such as the development of the “single securitization platform”) would be transferred to the FMIC.  Following the Certification, all existing single-family guarantees previously issued by the GSEs would be transferred to the Treasury, and backed by the full faith and credit of the United States.

The Proposed Bill would transfer, at no cost, the GSE’s multifamily business to the FMIC.  All multifamily guarantees would be backed by the full faith and credit of the United States.

Other Provisions of the Proposed Bill

  • All Covered Securities would be exempt securities “within the meaning of the laws administered by the Securities and Exchange Commission,” to the same extent as Treasury Securities.
  • Covered Securities would not be subject to the “qualified residential mortgage” requirements.
  • The portfolios of the GSEs would be required to be reduced to zero by the end of the year in which the Certification is delivered.
  • The housing goals of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 would be repealed.
  • The FMIC, in consultation with industry groups, servicers, originators, issuers and investors, would be required to develop, adopt and publish standard uniform securitization agreements for Covered Securities. 
  • The FMIC would be required to establish, operate and maintain an electronic registry system for Eligible Mortgages that collateralize Covered Securities.  The registry would track changes in servicing rights and beneficial ownership interests in such Eligible Mortgages.
  • The FMIC would be required to establish, operate and maintain a database for the collection, public use and dissemination of uniform loan level information on Eligible Mortgages.
  • No federal credit, grants or “aid” would be permitted to be extended in connection with lines of credit or financing to any private market holder of the first loss position on Covered Securities if such holder, on or after the date of enactment of the Proposed Bill, “has defaulted on its obligations, is at risk of defaulting on its obligations, or is likely to default, absent such assistance from the United States Government.”
  • The FMIC would be required to establish, operate and maintain a database that could be accessed by any holder of a lien on a property securing an Eligible Mortgage, and that would identify and track if any subordinate lien is placed on the related property.  The database would notify “to the extent feasible” the senior lienholder of the existence of the subordinate lien, and inform each lienholder of the performance of the other lien.
  • The Proposed Bill would require a potential subordinate lienholder to seek and obtain the approval of the senior lienholder in cases where the loan to value ratio of the mortgage loan would exceed 80%.  Subordinate liens which are not approved by the senior lienholder would be void.

SFIG expects to be involved in the discussions concerning the further development of the Proposed Bill, and in GSE reform matters generally.  If you are interested in participating in these efforts, please contact SFIG at Richard.Johns@sfindustry.org.

Click here for the Proposed Bill.  Click here for the Administration’s February 2011 White Paper.




The Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) held a joint meeting on June 18, 2013 to discuss comments received on their proposed joint "Accounting for Financial Instruments" proposals for classification and measurement. 

U.S. market participants have raised significant concerns regarding the proposal related to classifying and measuring beneficial interests in securitized financial assets, in particular the difficulty in obtaining the information necessary to perform the “look through” test and the amount of effort that would be necessary to perform the analysis.  These difficulties could result in interests being recorded at fair value with changes recorded in profit and loss for investors in securitizations.  International Financial Reporting Standards have similar requirements to U.S. GAAP as related to interests in securitizations, however the IASB did not request comments on such provisions in its limited amendment project.  The IASB also indicated that they have not been informed of any significant concerns to date.  SFIG’s Accounting Policy Committee is planning on discussing these matters with the FASB. 

Please contact SFIG at Richard.Johns@sfindustry.org if you are interested in participating in SFIG’s Accounting Policy Committee.

Click here for information on FASB and IASB’s Accounting for Financial Instruments project.



The City Council of North Las Vegas, Nevada, will meet the evening of June 19, 2013 to discuss and possibly vote on authorizing the City Manager to enter into an Advisory Services Agreement with Mortgage Resolution Partners (MRP).  MRP has been actively promoting the use of the doctrine of eminent domain to facilitate the modification and refinancing of what it alleges are large numbers of performing, underwater mortgage loans in private-label RMBS trusts. 

The City of Richmond, California is also considering an eminent domain strategy with MRP.

The eminent domain strategy, in brief, would involve a municipality invoking that authority to seize performing, "underwater" mortgage loans (i.e., mortgage loans in which the mortgage note principal balance exceeds the current market value of the property) for properties located within the municipality.  The municipality would pay a notional “fair value” for the mortgage loan, based on some percentage of the property's current market value.  The mortgage note’s principal would be written down by the municipality, and the mortgage loan would be refinanced through a Federal Housing Administration (FHA) insured loan. 

On June 11, 2013, U.S. Representatives Ed Royce (R-CA), Gary Miller (R-CA) and John Campbell (R-CA) sent a letter to U.S. Department of Housing and Urban Development (HUD) Secretary Shawn Donovan asking him to confirm HUD's policy concerning MRP’s proposal to refinance mortgage loans acquired via eminent domain through the FHA.  The Representatives stated that they "do not believe this is appropriate public policy, even if this use of eminent domain were to survive the inevitable legal challenges that would follow any decision to seize mortgages."

The minutes of prior meetings of the North Las Vegas City Council at which the MRP proposal was discussed indicate that MRP’s representatives frequently refer to what they believe to be the “consensual” nature of eminent domain on all parties concerned.

The possible use of eminent domain with respect to underwater mortgages has generated much controversy.  The concept has been promoted by Robert Hockett, a Professor of Financial and Monetary Law at Cornell Law School.  Professor Hockett has also been a recent visiting scholar at the Federal Reserve Bank of New York (New York Fed).

On June 10, 2013, the New York Fed published an article by Professor Hockett in its journal, "Current Issues in Economics and Finance."  The very publication of the article, "Paying Paul and Robbing No One: An Eminent Domain Solution for Underwater Mortgage Debt," generated controversy.  On June 11, 2013, the Wall Street Journal’s lead editorial took issue with the New York Fed’s decision to publish Professor Hockett's article, stating that it found it “surprising” that “the New York Fed would suddenly lend its intellectual imprimatur to a dubious proposal for government to use eminent domain to seize underwater mortgages.” 

MRP responded on June 12, 2013 to the Wall Street Journal editorial with a posting on its website, citing many “inaccuracies and misunderstandings” in the editorial.

If you are interested in participating in SFIG's discussions with industry participants on the eminent domain topic, please contact SFIG at Richard.Johns@sfindustry.org.

Click here for MRP's proposed Advisory Services Agreement to the City of North Las Vegas, Nevada.  Click here for the minutes of the North Las Vegas City Council's meeting of March 6, 2013 regarding the MRP proposal.  Click here for the minutes of the City Council's April 30, 2013 meeting regarding the proposal.  Click here for Professor Hockett's article in the New York Fed's Journal.  Click here for the June 11, 2013 Wall Street Journal editorial (subscription required).  Click here on MRP's response to the editorial.  Click here for the letter from Representatives Royce, Miller and Campbell.



On June 14, 2013, the European Union’s (EU) Executive Commission (Commission) announced that it was extending the June 15, 2013 deadline to September 1, 2013 for the European Securities and Markets Authority (ESMA) to decide if U.S. derivatives rules are “equivalent” to those in the EU.

If the ESMA were to determine that the U.S. and EU derivatives rules were not equivalent, then U.S. firms doing derivatives business in the EU would be required to comply with both sets of rules.

The Commission stated that “… we consider that the deadlines for the submission of ESMA technical advice need to be reviewed to allow ESMA more time to take into account of international on-going developments and to consider their implications fully.”

Click here for a press report regarding the Commission’s delay of the deadline.



In a June 13, 2013 speech to the Institute of International Bankers, Commodities Futures Trading Commission (CFTC) Commissioner Bart Chilton suggested a middle course regarding the cross-border application of U.S. derivatives rules.

At present, an exemption provides relief for the foreign subsidiaries of U.S. entities from having to comply with the new swap reform provisions of the Dodd-Frank Act.  That exemption expires on July 12, 2013.  The CFTC’s commissioners are divided on whether to extend the exemption beyond that date, with Chairman Gary Gensler opposing such an extension and Commissioner Scott O’Malia favoring it.

Commissioner Chilton, in his remarks, noted that the five largest U.S. commercial bank derivatives dealers account for 93% of the $223 trillion of notional value of the U.S. bank derivatives market, and that these five banks have over 3,300 foreign subsidiaries.  He added that “[t]he risk that builds up in one of a handful of these foreign subsidiaries (or any foreign entity otherwise deeply interconnected with U.S. firms) can, and in recent history has, led to risks to the U.S. and international economy.”

Specifically, Commissioner Chilton suggested that the CFTC take two measures regarding cross-border derivatives regulation:

“Prior to July 13, 2013 [the CFTC] should approve our [previously-issued] guidance.  We need to make sure the right institutions are subject to appropriate regulation and oversight with recent history as a guide.  The definition of ‘U.S. person’ should be broad enough to capture funds that market to U.S. investors.  The [CFTC] should also ensure that foreign firms with a direct and significant connection to U.S. commerce, including guaranteed affiliates of registered swaps dealers, do not escape regulation.

In addition, we should allow for substituted compliance only when foreign rules are truly comparable in terms of substance, enforcement, and outcomes as U.S. rules, particularly when it comes to five categories of rules, i.e., clearing, capital, margin, trade price transparency (particularly post-trade), and customer protection.

At the same time, we should simultaneously implement targeted, staggered cross-border compliance.  I’m suggesting that we provide this phased-in compliance with the final rules for those entities that fall within (given our guidance) the definition of U.S. person or foreign firms that have a direct and significant connection to U.S. commerce.  For example, foreign affiliates of U.S. swaps dealers that are guaranteed by a U.S. parent (like AIG Financial Products in London).  AIG’s London credit default swaps helped nearly take down the U.S. economy in 2008 and we need to make sure that type of reckless swap trading doesn’t do the same again. 

Such compliance requirements should be part and parcel of the guidance – they go together – and should be done at the same time.  We should provide this targeted, staggered compliance as an appropriately nuanced, time-limited solution that is cognizant of global regulatory efforts, particularly that of the E.U.”

Click here for Commissioner Chilton’s speech.  Click here for Chairman Gensler’s speech.  Click here for Commissioner O’Malia’s June 6, 2013 statement.  Click here for Commissioner O’Malia’s June 12, 2013 speech. 



In a June 13, 2013 speech at a Hedge Fund Association symposium, U.S. Representative Scott Garrett (R-NJ), a vocal critic of the Dodd-Frank Act, conceded that the outright repeal of that Act “ain’t gonna happen.”

He suggested that a more targeted approach than repeal could be an effective way of addressing his and other critics concerns regarding alleged shortfalls of the Dodd-Frank Act.  As an example of such targeted legislation, he pointed to H.R. 1256 that recently passed the U.S. House of Representatives on a bi-partisan basis, and that he introduced.  That piece of legislation would require the Commodities Futures Trading Commission and the Securities and Exchange Commission jointly to issue a single rule regarding an approach to certain cross-border derivatives regulation issues.

Click here for a press report on Representative Garrett’s speech.  Click here for H.R. 1256.



In a lawsuit filed on June 10, 2013 (Lawsuit)  in the U.S. Court of Claims, several preferred and common shareholders of Fannie Mae and Freddie Mac challenged the imposition on September 6, 2008 of conservatorship on such companies.  The Lawsuit also challenges the actions of the U.S. Government in entering into the preferred stock agreements with Fannie Mae and Freddie Mac pursuant to which the U.S. Department of the Treasury (Treasury) ultimately injected $187 billion into those entities.

The essence of the plaintiffs’ claim is that these actions violated the Fifth Amendment to the U.S. Constitution, which provides that the Government shall not deprive any person of “property without due process of law” and prohibits the Government from appropriating private property for public use “without just compensation.”  The plaintiffs allege that “[e]xigent circumstances do not curtail these fundamental rights.”

The Lawsuit further alleges that the Government forced Fannie Mae and Freddie Mac into conservatorship not to preserve and protect their assets, as the plaintiffs allege is required by law, but rather to use them as vehicles to provide extraordinary support for the nation’s mortgage market and other financial institutions.

The plaintiffs detail the circumstances specified in the Housing and Economic Reform Act of 2008 under which the Government could appoint the Federal Housing Finance Authority as conservator of both companies. They argue that none of the circumstances were satisfied; therefore, the plaintiffs allege, the Government did not have the authority to place Fannie Mae and Freddie Mac into conservatorship.

Click here to read the complaint filed in connection with the Lawsuit.



SFIG’s inaugural Summer Symposium will be held on Wednesday, June 26, 2013.  The Symposium will be followed by a cocktail party.  The event is open to both members and non-members, and is complimentary to attend.  The event will be held from 5 pm to 8 pm at the offices of Skadden, Arps, Slate, Meagher and Flom LLP, Four Times Square, New York, New York. 

The agenda will include three parts:  a panel discussion on “Credit Rating Agency Reform – Assessing the Feasibility of a Credit Rating Agency Assignment System;” a presentation on “Dodd-Frank Swap Clearing Requirements and Potential Impact on Securitization;” and a panel discussion on “The Return of a Sustainable RMBS Market – Inhibitors and Drivers.”

Please note that SFIG will not be able to accommodate members of the press at this event.

Click here to register for the Symposium, and for more details. 

ABS Vegas 2014 – January 21-24, Las Vegas, Nevada.  Click here for more information.

SFIG is now accepting sponsorship contracts for this conference.  If you are interested, please contact SFIG.



SFIG has a number of Committees and Task Forces meeting and working on many topics of interest to the securitization industry.  Please visit our website 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 (www.sfindustry.org) to learn about membership opportunities.


Contact us at info@sfindustry.org.


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