June 3, 2015 Newsletter
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June 3, 2015
 

SFIG News

Issue Spotlight

SFIG Calendar

Advocacy Outlook

Industry News Highlights

 
SFIG NEWS
SFIG ANNOUNCES IMN’S ABS EAST 2015 SECOND KEYNOTE ROUNDTABLE

As Lead Association Partner for IMN’s 21st Annual ABS East Conference, SFIG is proud to announce the second keynote roundtable: Single Security & The Common Securitization Platform. The featured keynote panelists will report on the initiative to develop a single Enterprise MBS supported by Fannie Mae and Freddie Mac's jointly-owned Common Securitization Platform.

David Applegate
Chief Executive Officer
Common Securitization Solutions, LLC
Robert Fishman
Chief Executive Officer
Federal Housing Finance Agency
Mark Hanson
Senior Vice President Securitization
Freddie Mac
Renee Schultz
Senior Vice President
Fannie Mae

Join SFIG and over 3,500 of your industry peers expected to attend this year’s conference to gain new business opportunities and hear comprehensive coverage on the revival and strengthening of the U.S. securitization market.

SFIG’s participation at ABS East further extends members’ meaningful educational opportunities and provides a beneficial platform to openly discuss the securitization market and financial sector as a whole.

Reserve your place today! Sponsorship opportunities are available here. Please contact Christopher Keeping for more information at (212) 901-0533 or ckeeping@imn.org.

 
 
REMINDER: REGISTER FOR SFIG’S SPRING SYMPOSIUM

SFIG would like to remind everyone to register for our Spring Symposium. The event, followed by a cocktail reception, will be held on Tuesday, June 23rd from 5:00 p.m. to 8:00 p.m. (ET). Societe Generale will be hosting the symposium at their New York City office. Please click here to register. Agenda details will follow.

 
 
HOUSE TO DEBATE THUD APPROPRIATIONS BILL; INCLUDES EMINENT DOMAIN LANGUAGE

This afternoon, the House of Representatives is scheduled to begin consideration of H.R. 2577, the Transportation, Housing and Urban Development, and Related Agencies Appropriations Act, 2016 (“THUD”). As reported by SFIG in April, THUD includes a provision, Section 229, that would prevent the Federal Housing Administration, Government National Mortgage Administration, or Department of Housing and Urban Development from facilitating the use of eminent domain. The House will likely vote to approve the bill on Thursday, June 4th.

SFIG has consistently opposed the use of eminent domain to seize securitized mortgage loans for the purposes of modification, and signed a joint trade association letter endorsing the inclusion of Section 229 in the FY 2016 THUD Bill. For a detailed overview of SFIG’s policy on eminent domain, please see our Eminent Domain Position Paper.

 
 
SFIG TO HOLD LEGAL COUNSEL COMMITTEE CALL ON RECENT SECOND CIRCUIT DECISION

On May 22nd, the Second Circuit court handed down a decision that non-national bank entities are not entitled to protection under the National Bank Act from state law usury claims because they are assignees of a national bank. Given the possibly significant implications for the securitization industry, SFIG will hold a Legal Counsel Committee call tomorrow, June 4th, from 10:00 a.m. – 11:00 a.m. (ET). Please see our Issue Spotlight for further details regarding this case.

If you would like to join this call, please contact Alyssa.Acevedo@sfindustry.org.

 
 
CSF NAMES RICHARD JOHNS AS OVERSEAS CONSULTANT

The Chinese Securitization Forum (“CSF”) named SFIG's Executive Director, Richard Johns, as the Overseas Consultant of their Nominating Committee in a press release today, June 3rd. In this role, Mr. Johns will advise the CSF's Nominating Committee on affairs relating to the selection and appointment of overseas experts to positions on the Board and various committees of the CSF. Mr. Johns was selected to be the Overseas Consultant given his career experience leading advocacy programs related to major legislative initiatives and working closely with many U.S. regulatory bodies.

 
 
SFIG WELCOMES THE NEWEST MEMBER OF WOMEN IN SECURITIZATION!

Please join us in welcoming our Director of Advocacy, Michael Flood, and his wife Meg’s beautiful bundle of joy, Elizabeth Rebecca Flood! She was born on May 14th, weighing in at 8 lbs and 6 oz. Congratulations to the proud parents and big brother, JJ!

 
 
ISSUE SPOTLIGHT
SECOND CIRCUIT HOLDS THAT DEBT BUYER MAY NOT RELY ON FEDERAL PREEMPTION OF STATE USURY LAWS
By: Jim Huizinga, Partner at Sidley Austin LLP

On May 22, 2015, the Second Circuit Court of Appeals issued a very unfavorable decision in Madden v. Midland Funding, LLC, 2015 U.S. App. LEXIS 8483 (Case No. 14-2131), that rejected the ability of a debt buyer to rely on federal preemption of state usury laws. The court held that a debt buyer that purchased a charged-off credit card account from a national bank was not entitled to charge the interest rate that federal law permitted the national bank to collect under the credit card agreement. In reaching this conclusion, the Madden case departs from well established principles of federal and state usury laws.

In Madden, the debt buyer attempted to collect interest from a consumer at the interest rate permitted under the credit card agreement between the bank and the consumer for the period after the debt collector purchased the loan. The consumer sued the debt buyer, arguing that the debt buyer was subject to an interest rate limit imposed under New York law that would have applied to loans originated by the debt buyer, and claiming the debt buyer violated the federal Fair Debt Collection Practice Act by attempting to collect a debt that violated the usury law. The District Court agreed with the debt buyer that, as an assignee of the defaulted loan account, the debt buyer could continue to collect the interest rate that the National Bank Act permitted the bank to charge under 12 U.S.C. § 85 and that the any application of the usury laws of New York (where the consumer lived) was preempted by federal law. The District Court’s decision was supported by existing case law under the National Bank Act, including FDIC v. Lattimore Land Corp., 656 F.2d2d 139 (5th Cir. 1981) and Krispin v. May Dep’t Stores Co., 218 F.3d 919 (8th Cir. 2000), as well as generally accepted authority under state usury laws, that holds that loan purchasers who acquire loans from banks and other originators are permitted to collect the same interest rates permitted for the loan originators.

The Second Circuit reversed the District Court’s decision, holding that the plaintiff’s claim that the debt buyer violated New York law was not preempted by the National Bank Act. Instead of applying the general principles of usury law for assignees, the Second Circuit focused on the fact that the debt buyer was not a national bank. It concluded that federal preemption under the National Bank Act applied to a non-bank only where failure to do so would significantly impair the national bank’s ability to exercise its federally granted powers. The Second Circuit concluded that there was no such significant impairment, and thus no preemption, although it does not appear that there was any factual basis for that conclusion before the court. The Second Circuit returned the case to the District Court to consider whether, apart from federal preemption under the National Bank Act, the interest rate provisions of Delaware (rather than New York) law applied under the Delaware choice of law provision in the cardholder agreement.

The defendant in the Madden case is expected to request a rehearing of the decision from the Second Circuit. Such a request ordinarily would be required to be filed later this week, but the debt buyer has requested an extension until mid-June to file the motion and it is anticipated that the extension will be granted. The Second Circuit historically has granted relatively few petitions for rehearing and thus the defendant may be required to request the United States Supreme Court to grant certiori to reverse the Second Circuit’s opinion. Although it can be difficult to get the United States Supreme Court to review a case, it may be willing to review the Madden decision because it conflicts with holdings from other federal Circuit Courts of Appeal and prior precedent from the United States Supreme Court.

SFIG has offered amicus support for the defendant’s motion for reconsideration in the Madden case and will provide updates on further developments.

 
 
SFIG CALENDAR
LEGAL COUNSEL COMMITTEE CALL
THURSDAY, June 4, 2015
10:00 a.m. – 11:00 a.m. (ET)
 
 
CREDIT CARD ISSUER COMMITTEE CALLS
  • THURSDAY, June 4, 2015
    10:00 a.m. – 11:00 a.m. (ET)

  • THUSRDAY, June 11, 2015
    10:00 a.m. – 11:00 a.m. (ET)
 
 
NRSRO DUE DILIGENCE INDUSTRY GUIDE COMMITTEE CALLS
  • THURSDAY, June 4, 2015
    3:00 p.m. – 4:00 p.m. (ET)

  • TUESDAY, June 9, 2015
    1:30 p.m. – 2:30 p.m. (ET)

  • THURSDAY, June 11, 2015
    3:00 p.m. – 4:00 p.m. (ET)
 
 
RISK RETENTION INDUSTRY GUIDE WORKING GROUP CALL
TUESDAY, June 9, 2015
11:00 a.m. – 12:00 p.m. (ET)
 
 
AUTO ISSUER COMMITTEE CALL
WEDNESDAY, June 10, 2015
2:00 p.m. – 3:00 p.m. (ET)
 
 
REGULATORY CAPITAL & LIQUIDITY COMMITTEE CALL
THURSDAY, June 11, 2015
11:00 a.m. – 12:00 p.m. (ET)
 
 
IMN’s GLOBAL ABS 2015 CONFERENCE
TUESDAY, June 16, 2015 – THURSDAY, June 18, 2015
The Barcelona International Convention Centre
Barcelona, Spain
Registration is available here.
 
 
SFIG SPRING SYMPOSIUM
TUESDAY, June 23, 2015
5:00 p.m. – 8:00 p.m. (ET)
Societe Generale
245 Park Avenue
New York, NY
Registration is available here.
 
 
SFIG BOARD OF DIRECTORS MEETING

WEDNESDAY, June 24, 2015
12:00 p.m. - 5:00 p.m. (ET)
Deloitte & Touche LLP
30 Rockefeller Plaza
New York, NY 10112
Note: Closed Meeting

 
 
IMN’s ABS EAST 2015 CONFERENCE
WEDNESDAY, September 16, 2015 – FRIDAY, September 18, 2015
The Fontainebleau
Miami Beach, FL
Registration is 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. 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 and will respond as necessary. The Task Force has also met to discuss the Carney-Delaney-Himes GSE Reform bill and has updated its briefing book on the legislation 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 theJohnson-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 initial 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; 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. 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 NRSRO Due Diligence Industry Guide Work stream is continuing to review the due diligence elements of the Final Rules on NRSROs. The working group will meet weekly on Tuesdays and Thursdays at 3:00 p.m. (ET) until June 11th 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 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.

 
 
INDUSTRY NEWS HIGHLIGHTS
FINRA MAKES ABS PRIVATE PLACEMENT TRADE INFORMATION AVAILABLE FOR FREE

Starting June 1st, the Financial Industry Regulatory Authority (“FINRA”) is making post-trade information on ABS available free to the public through its Trade Reporting and Compliance Engine (“TRACE”), according to their recent press release. The information, now available through TRACE, includes timing of trades, price, and volume and is to be posted no later than 45 minutes following a trade, a time frame that will shrink to 15 minutes in December. The ABS on which FINRA is making data available includes auto, credit card, and student loan ABS. TRACE will also provide data on 144A ABS offerings.

According to an article from Financial Advisor, FINRA Vice President Ola Persson said that “[t]he dissemination of transaction information in asset-backed securities is another milestone in making the debt markets more transparent, ensuring the integrity of markets and investor protection.”

However, the TRACE reporting has prompted some concern. Bloomberg notes that an industry report asks whether broker/dealers will “be willing to provide the same level of liquidity when the market price of their positions is more readily broadcast to the market.”

 
 
CHINESE BANKS CUT ABS OFFERINGS DESPITE PREMIER’S EFFORTS TO REVIVE SECURITIZATION

Chinese lenders have cut offerings of ABS 45 percent to 43.4 billion yuan ($7 billion) this year according to a recent Financial Review article. Loans have been reduced for four straight months despite Premier Li Keqiang’s and policymaker efforts to expand the securitization quota by 500 billion yuan to free up space on their balance sheets for fresh lending.

 
 
NEVADA PASSES HOA SUPER-PRIORITY LIEN FIX

Last Thursday, May 28th, Nevada signed into law Senate Bill 306, which will fundamentally alter the homeowner association (“HOA”) foreclosure sale landscape in the state, according to a recent Lexology article.

The revised law, which takes effect on October 1, 2015, provides clarity to the super-priority statues with respect to: (a) the type of notice that must be provided to lien holders by an HOA regarding the HOA deficiency and the HOA sale; (b) the manner of notification of the HOA deficiency and HOA sale; (c) amounts that can lawfully be included in the super-priority amount that can extinguish a first deed; and (d) the location of an HOA sale. The revised law also provides a 60-day redemption period for the owner of the property and first lien holder following an HOA sale.

SFIG is reviewing the effects of HOA super-lien status on private-label securitizations through its Residential Mortgage Committee. Please contact Mary.Robinson@sfindustry.org if you are interested in joining the committee.

 
 
EU SEEKS TO REVITALIZE SECURITIZATION MARKETS

European regulators are trying to restart ABS markets. According to a recent article in Investor & Pensions Europe, “[p]ublicly placed new issuance in the first quarter of 2015 was at its highest level since 2007.” The article notes, however, that most new issuance has been Dutch and UK RMBS and German auto loan receivables.

The outlook for 2015 suggests a shrinking market. Despite recent proposals to develop a high quality securitization framework in the EU, Solvency II and Basel III still make ABS unattractive investments for insurance companies and banks who were key market players before the crisis according to Ed Panek, head of ABS Investment at Henderson Investment.

 
 
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

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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