March 18, 2015 Newsletter
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March 18, 2015
 

SFIG News 

SFIG Calendar

Advocacy Outlook

Recent Developments

Upcoming Events in Washington

 
SFIG NEWS
NOMINATIONS FOR THE 2015 SFIG BOARD OF DIRECTORS NOW OPEN!

SFIG is now accepting nominations for its Board of Directors in anticipation of the June 2015 Board rotations. Eligibility for a position on the SFIG Board of Directors is limited to individuals associated with SFIG’s primary members. Members may nominate themselves or another qualified industry participant.

SFIG’s Nominating Committee will review nomination submissions, consult with members and make recommendations to the current Board of Directors. The Nominating Committee is dedicated to selecting a balanced Board of Directors that is reflective of the membership and the industry at large, and is committed to working hard and advancing the principles of SFIG.

Board of Director terms are for two years. Nominations for the Board of Directors will be accepted until April 30, 2015.

If you have any questions or require any clarification around the nominating process, please email committees@sfindustry.org.

Click here to submit your nominations. Please note that the nomination form is open to registered members only.  Members that have not yet registered can do so here.
 
 
SFIG CALENDAR
EQUIPMENT FLOORPLAN ISSUER CALL
THURSDAY, March 19, 2015
10:00 a.m. – 11:00 a.m. (ET)
 
 
BIWEEKLY NRSRO DUE DILIGENCE INDUSTRY GUIDE WORKING GROUP CALL
THURSDAY, March 19, 2015
3:00 p.m. – 4:00 p.m. (ET)
 
 
WEEKLY INVESTOR COMMITTEE CALL
FRIDAY, March 20, 2015
1:30 p.m. – 2:30 p.m. (ET)
Please note: This is a closed meeting.
 
 
CHINESE SECURITIZATION FORUM 2015 ANNUAL CONFERENCE
MONDAY, March 23, 2015 – WEDNESDAY, March 25, 2015
Crowne Plaza Beijing Lido
Beijing, China
Registration available here.
 
 
BIWEEKLY EQUIPMENT ISSUER COMMITTEE CALL
MONDAY, March 23, 2015
2:00 p.m. – 3:00 p.m. (ET)
 
 
BIWEEKLY RISK RETENTION INDUSTRY GUIDE CALL
TUESDAY, March 24, 2015
11:00 a.m. – 12:00 p.m. (ET)
 
 
BIWEEKLY CREDIT CARD ISSUER COMMITTEE CALL
THURSDAY, March 26, 2015
10:00 a.m.—11:00 p.m. (ET)
 
 
BIWEEKLY RESIDENTIAL MORTGAGE COMMITTEE CALL
THURSDAY, March 26, 2015
2:00 p.m.--3:00 p.m. (ET)
 
 
WEEKLY INVESTOR COMMITTEE CALL
FRIDAY, March 27, 2015
1:30 p.m.-2:00 p.m. (ET)
Please Note:  This is a Closed Meeting
 
 
ANDREW DAVIDSON & CO. ROUNDTABLE: SIMPLIFYING GSE REFORM
WEDNESDAY, April 8, 2015
10:00 a.m. – 4:00 p.m. (ET)
Willard InterContinental
Washington, D.C.
 
 
RBMS 3.0 REPRESENTATIONS, WARRANTIES, AND REPURCHASE ENFORCEMENT WORKING GROUP IN-PERSON MEETING

WEDNESDAY, April 15, 2015
9:00 a.m. – 5:00 p.m. (ET)
Mayer Brown LLP
1221 Avenue of the Americas
New York, NY

 
 
RBMS 3.0 ROLE OF TRANSACTION PARTIES & BONDHOLDER COMMUNICATION WORKING GROUP IN-PERSON MEETING

THURSDAY, April 16, 2015
9:00 a.m. – 5:00 p.m. (ET)
Seward & Kissel LLP
One Battery Park Plaza
New York, NY

 
 
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 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 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 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 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 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 2014, 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 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 Task Force submitted a response 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. The HQS Task Force is currently developing a response to the European Commission’s related proposal, announced in conjunction with its plans for a capital markets union. To join the High Quality Securitization Task Force, please contact Amanda.Bateman@sfindustry.org.

 
 
INDUSTRY NEWS HIGHLIGHTS
U.S. BANKS LIKELY TO BE GRANTED DELAY OF MONTHS, NOT YEARS, TO COMPLY WITH (NOT YET FINAL) FINAL SWAP RULES

Swap dealers hoping for a two-year extension before having to comply with (not yet final) new rules on margin for uncleared swaps will likely be disappointed by the delay that the Commodity Futures Trading Commission (“CFTC”) is contemplating for U.S. banks. In his prepared remarks at an industry conference on March 11th, CFTC Chairman Timothy Massad told audiences that his agency is currently working with bank regulators to finalize the proposed rules and hope to do so by the summer. However, he indicated that while the finalized rules “are not likely to be identical” to those adopted by the CFTC’s counterparts in Europe and Japan, a delay measured in months rather than years would be more appropriate for banks to become compliant with the new framework.

According to an article in the Financial Times, Massad told conference attendees in follow up comments that “There’s a good chance we’ll delay but not by a lot… Some of the industry want to get a two-year delay, but I don’t think that’s justified. It’s a matter of months.” While the U.S. hopes to harmonize the timetable for implementing the rules, problems still exist over differences in the amount of margin required to be posted for trading. Sven Gentner, Counsellor for Economic & Financial Affairs, delegation of the European Union to the U.S., is quoted in the Financial Times article as saying, “Once we understand the problem, we can move forward with the issue.”

 
 
HENSARLING DECRIES UNIFORM GLOBAL STANDARD FOR FINANCIAL REGULATION

Yesterday, Treasury Secretary Jack Lew testified before the House Committee on Financial Services (“Committee”) to discuss the U.S. government’s investments in, and influence on, the International Monetary Fund (“IMF”) and Multilateral Development Banks. Secretary Lew stated, “U.S. leadership in international financial institutions enables us to influence how and where resources are deployed — often on a scale that we cannot achieve through our bilateral programs alone.”

However, Committee Chairman Hensarling (R-TX) expressed his concern that U.S. participation in the IMF and the Financial Stability Board may weaken national regulators’ ability to tailor global regulatory standards to the American economy. “The imposition of one global standard of financial regulation by this administration will undoubtedly harm American innovation and American economic growth,” Chairman Hensarling stated. “Even more importantly, Americans will find themselves paying more to insure their homes and families…And our small businesses on Main Street will suffer as sources of long-term capital begin to dry up. We must not allow this to happen.” stated the Chairman.

 
 
NEW REPORT FROM MOODY'S HIGHLIGHTS SECURITIZATION'S CONTRIBUTION TO U.S. ECONOMY

Securitization continues to contribute a significant share of funding to the U.S. economy according to a new report from Moody’s Investors Service.

U.S. businesses turned to collateralized loan obligations (“CLOs”) and commercial mortgage-backed securities (“CMBS”) for $208 billion worth of capital and liquidity in 2014. Together, CLOs and CMBS, which help fund bank loans to commercial enterprises and commercial real estate properties, represented nearly half of U.S. securitization volume in 2014, according to the report "Securitization Provides Meaningful Funding to the US Economy." Securitization continues to bolster American consumers’ access to capital as well, largely through the issuance of residential mortgage-backed securities (“RMBS”), although the virtual disappearance of the private-label RMBS market, coupled with the replacement of Federal Family Education Loan Program with a direct Federal lending product, has led to a reduction in securitization's relative share of annual capital market issuance from 48 percent in 2007 to 30 percent in 2014, and contributed to a 200 percent increase in annual Treasury bond issuance over that same period.

The full report, "Securitization Provides Meaningful Funding to the US Economy" is available to you on a complimentary basis: A moodys.com login, which is required to access this report, is available for free through a one-time only registration process.

 
 
FORMER FHFA HEAD DEMARCO QUESTIONS ADMINISTRATION'S APPROACH TO HOUSING POLICY

Edward J. DeMarco, former chief of the Federal Housing Finance Agency (“FHFA”), issued remarks last week critical of the Obama administration’s approach to housing finance reform. In a recording of the remarks obtained by American Banker, DeMarco criticized the administration’s focus on expanding credit by cutting premiums on Federal Housing Administration mortgage insurance and FHFA encouragement of purchasing lower down-payment loans by the government sponsored enterprises (“GSEs”). “In the past year or so we’ve actually seen a renewed policy focus on questions regarding access to credit, which can risk repeating the approach that contributed to the financial crisis—that being the government’s rather vigorous concern about expanding access to credit,” DeMarco said.

During his time at the helm of FHFA, DeMarco intended to lower GSE conforming loan limits to help spur growth in the private label market—an action not currently being considered by current head of the FHFA, Mel Watt. According a presentation prepared by DeMarco and senior Milken Institute fellow Phil Swagel that accompanied DeMarco’s remarks “FHFA is not proceeding with a gradual reduction in loan limits—a decisions that inhibits the return of private markets.” However, DeMarco did express his support for recent GSE credit risk transfers and sales of non-performing loans.

The administration was not the sole target of DeMarco’s criticism regarding housing policy and housing finance reform. Congressional lawmakers also were called out for their lack of action on GSE reform, with DeMarco noting that mortgage finance policy has served to “promote housing debt rather than homeownership."
 
 
BIPARTISAN GROUP OF SENATORS RAISE CONCERNS ABOUT THE FHFA COMMON SECURITIZATION PLATFORM INITIATIVE

Yesterday, Senators Corker (R-TN), Warner (D-VA) and six other Senate colleagues sent a letter to Federal Housing Finance Agency (“FHFA”) Director Mell Watt raising concerns about the development of the Common Securitization Platform (“CSP”) and called on the agency to adopt and provide the following changes to Congress:

  1. Reassess the current makeup of the CSP Board to include individuals that represent market participants beyond Fannie Mae and Freddie Mac; 
  2. Establish an advisory committee to provide a vehicle for outside participants that will likely play a role in the post-GSE housing finance structure to have a say in the early stage development of this critical market infrastructure;
  3. Provide a plan for the transition of CSP from its current ownership structure into one with an open architecture and more flexibility to accommodate multiple future states of housing finance; including suggested legislative language for such an outcome; and
  4. Provide a forward-looking timeline and budget estimates for the development of the CSP from where it exists today through the point at which it is fully operational. 

“We urge you to make these concerns a top priority within the development of the Common Securitization Platform,” stated the Senators.  

To view SFIG’s policy positions on the FHFA’s CSP initiative, please click here.

 
 
MOODY'S UPDATES STRUCTURED FINANCE RATINGS METHODOLOGIES

On Monday, Moody’s Investors Service reported that it has updated several cross-sector, primary and secondary rating methodologies for structured finance securities. Moody’s will incorporate a new counterparty risk (“CR”) Assessment for banks as part of a revised bank rating methodology. The article stated:

The updates to the structured finance rating methodologies will generally have a positive rating impact on structured finance transactions. In the coming days, Moody's will issue separate announcements that will provide details on these implications. Moody's expects to conclude the majority of the structured finance rating reviews in the first half of 2015. The timeline to resolve these reviews will depend on the resolution process applied to the underlying bank ratings, as well as the assignment of CR Assessments.

Updates to the structured finance rating methodologies will focus on the cross sector ratings, treatment of triggers in structured finance transactions, asset-backed commercial paper ratings, credit card ratings, and other Moody’s documents. The rating agency plans to assign the CR Assessments to banks over time but will immediately start using approximations for CR Assessments as inputs into its credit analysis for structured finance transactions.     

 
 
ICMA CONCERNED THAT ECB'S BOND BUYING MAY DISTORT SECURITIZED LENDING

According to a recent Reuters article, the International Capital Markets Association (“ICMA”) is concerned that the European Central Bank’s bond-buying will cause problems in securitized lending markets over time if no action is taken to free up collateral. Specifically, the ICMA is worried that the ECB’s quantitative easing (“QE”) programme will compound the impact in bond and securities repurchase or repo markets of pending regulation intended to insure against a breakdown of market infrastructure.

Many market participants believe that QE has already distorted the repo market since its unveiling last week and the ICMA previously cautioned that the number of failed trades could increase if the rules are implemented in their current form as planned next year.

"There's no doubt in our mind that QE is another factor which further increases the pressure on collateral because it's taking securities out of the collateral market," said David Hiscock, ICMA's senior director, market practice and regulatory policy. "The effect of that is one which will grow over time as ECB QE proceeds."

 
 
UPCOMING EVENTS IN WASHINGTON
HOUSE FINANCIAL SERVICES SUBCOMMITTEE ON CAPITAL MARKETS AND GOVERNMENT SPONSORED ENTERPRISES HEARING ON "OVERSIGHT OF THE SEC'S DIVISION OF MARKET OVERSIGHT"

Thursday, March 19, 2015
9:00 a.m. (ET)
2167 Rayburn House Office Building
A webcast of the hearing will be available here.

 
 
SENATE BANKING COMMITTEE HEARING ON "EXAMINING THE REGULATORY REGIME FOR REGIONAL BANKS"

Thursday, March 19, 2015
10:00 a.m. – 12:00 p.m. (ET)
538 Dirksen Senate Office Building
A webcast of the hearing will be available here.

 
 
CFTC MARKET RISK ADVISORY COMMITTEE ("MRAC") PUBLIC MEETING

Thursday, April 2, 2015
10:00 a.m. – 1:30 p.m. (ET)
CFTC Headquarters lobby-level Hearings room
1155 21st St, NW, Washington, DC 20581

The MRAC will discuss issues related to: Current risk management techniques employed by Derivatives Clearing Organizations to ensure that the appropriate measures are in place to address the potential default of a significant clearing member; and the evolving structure of the derivatives markets, particularly with respect to Swap Execution Facilities.

 
 
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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