March 4, 2015 Newsletter
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March 4, 2015

SFIG News 

Issue Spotlight

SFIG Calendar

Advocacy Outlook

Industry News Highlights

SFIG is pleased to welcome Daniel Tees, our newest staff member. As a Policy Analyst, Daniel will be covering a broad plethora of advocacy initiatives. His previous experience includes performing business intelligence analysis, measuring marketing analytics, and implementing technology solutions and marketing activities. Mr. Tees earned his Bachelor of Science in Business Administration in 2012 from the University of Mary Washington.

This is a high profile position within the SFIG leadership team working directly with executive management, the Board of Directors, Committee Chairs and key members of SFIG’s membership. The Director of Mortgage Policy is responsible for the development and execution of a robust mortgage securitization policy program, specifically working to both further efforts to reinvigorate the private label market through SFIG’s RMBS 3.0 program and to develop comprehensive solutions and comment regarding both short and long term GSE reform. The role will also oversee member engagement and formulation of policy positions in response to any proposed legislative or regulatory developments impacting mortgage-backed securities, including Regulation AB II.

Further details may be found on the SFIG website Jobs page and candidates are encouraged to apply by submitting their credentials to



By Carol Hitselberger and David Sahr, Partners, with assistance from Adam Kanter, Michael Lewis and Donald Waack, Associates, of Mayer Brown LLP, “Client Alert”

Late Friday afternoon the agencies responsible for implementing the Volcker Rule released a new FAQ that broadly expands the scope of the “SOTUS” covered fund exemption. The agencies have interpreted the requirement under SOTUS that “no ownership interest in the covered fund is offered for sale or sold to a resident of the United States” to apply only with respect to offers or sales made by the foreign banking entity (or its affiliates) seeking to rely on the exemption. As a result, investments by foreign banking entities in third party funds should largely qualify for SOTUS, so long as the foreign banking entity (or any of its affiliates) does not act as sponsor or adviser of the fund and does not participate in the offer or sale of the fund’s ownership interests in the US.

The implications of this new guidance are potentially quite far reaching and should be very favorable for foreign banking entities. As a result of the new guidance, among other things, a foreign banking entity can rely on SOTUS to invest in a fund sponsored by a third party, even if that fund is marketed to US investors, so long as the foreign banking entity and its affiliates are not themselves involved in the US marketing (and assuming that the banking entity and the investment otherwise satisfy all of the conditions of SOTUS).

While the other conditions of SOTUS generally should not be difficult to satisfy in the event of bona fide investments by most foreign banking entities, it is important to ensure that certain key aspects of such investments are solely outside the United States, as required by the final rule. It is still problematic if, for example, the investment in the covered fund is financed by a US affiliate of the foreign banking entity, is accounted for directly or on a consolidated basis by a US branch or affiliate of the foreign banking entity, or the decision to invest is made by a US affiliate or even US personnel of the foreign banking entity. These conditions generally would not apply to an identical investment by a foreign banking entity in a fund that is not a covered fund, but they do apply to an investment in a covered fund under SOTUS, even with the new relief.

Notably, the new guidance does not change how a banking entity’s own sponsored funds are treated. The guidance also makes clear that when the banking entity seeking to rely on SOTUS (or one of its affiliates) acts as an investment manager, investment adviser, commodity pool operator or commodity trading advisor to a covered fund, or otherwise sponsors the fund, the agencies will view that banking entity as being involved in the offer or sale of interests in the fund. If in those cases the fund is offered or sold to US person investors, the SOTUS exemption would not be available to that banking entity.

THURSDAY, March 5, 2015
3:00 p.m. – 4:00 p.m. (EST)
FRIDAY, March 6, 2015
1:00 p.m. – 2:00 p.m. (EST)
MONDAY, March 9, 2015
2:00 p.m. – 3:00 p.m. (EST)
TUESDAY, March 10, 2015
11:00 a.m. – 12:00 p.m. (EST)
THURSDAY, March 12, 2015
10:00 a.m. – 11:00 a.m. (EST)

THURSDAY, March 12, 2015
383 Madison Avenue
New York City, NY 10017

Richard Johns will be speaking on the “Housing Reform: Bringing private capital back to the mortgage market” panel.

WEDNESDAY, March 18, 2015
12:00 p.m. – 3:00 p.m. (EST)
New York, NY
Please note: This is a closed meeting.

TUESDAY, March 24, 2015 – WEDNESDAY, March 25, 2015
Crowne Plaza Beijing Lido
Beijing, China
Registration available here.

This conference will offer fresh perspectives from leading players in the industry on securitization opportunities in China, including investors, issuers, regulators, international financial institutions, law firms, accounting firms, rating agencies, and servicers.


If you would like to participate in the work SFIG is undertaking through our committees as highlighted below, please e-mail 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

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

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 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 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 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

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

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

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

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

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

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 acomment letter in September 2013 on Money Market Fund Reform. If you are interested in joining this working group, please contact

The High Quality Securitization Task Force recently developed and 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. Next, the HQS Task Force will respond to the European Commission’s related proposal, announced recently in conjunction with its plans for a capital markets union. To join the High Quality Securitization Task Force and participate in the ongoing advocacy effort, please contact


The American Institute of Certified Public Accountants (“AICPA”) has released its guidance on agreed-upon procedures (“AUP”) engagements related to asset-backed securitizations that are considered third-party due diligence under the recently finalized rules for nationally recognized statistical rating organizations (“NRSROs”). In its Release No. 34-72936, the U.S. Securities Exchange Commission described due diligence services as those relating to checking the accuracy of the information or data about the assets provided by the securitizer or originator of the assets. As such, the securitization industry has sought guidance from accounting firms on whether AUPs can be executed in compliance with the rules after they are fully implemented in June.

According to the AICPA’s interpretation, the disclosure of the procedures or findings, or both, of the practitioner’s due diligence services is not prohibited. The AICPA also addresses issues such as inconsistent or incomplete reporting by the practitioner, modifying the illustrative report wording in order to meet professional standards, and distribution of procedures or findings to non-specified parties.

SFIG’s NRSRO Due Diligence Industry Guide Working Group has been actively engaged in identifying best practices related to the due diligence rules. SFIG welcomes the publication of the AICPA’s guidance on the rules and looks forward to incorporating its feedback into our own industry guide. To join the NRSRO Due Diligence Industry Guide Working Group, please contact


In remarks before the Coalition for Derivatives End-Users last week, Commodity Futures Trading Commission (“CFTC”) Chairman Timothy Massad signaled there may be some relief for market participants from the new regulatory framework for swaps. Pointing to Congressional action last December that would exempt commercial end-users from the rules, Massed told audiences, “the actions we are taking with respect to the proposed rule on margin for uncleared swaps reflects this Congressional direction” as well as the CFTC’s top priorities. Regarding the passage of margin provisions in the Terrorism Risk Insurance Act, he noted that the CFTC is “working to implement these statutory end-user margin protections quickly through an interim final rule, as Congress intended.”

The CFTC is also engaging international regulators to ensure they are “as similar as possible with the rules that Europe and Japan are looking to adopt.” As such, Massad explained there are a number of changes he is willing to incorporate into the CFTC’s proposal to ensure greater consistency. He notes, for example, the threshold for required margin is lower in the CFTC's proposal than in the proposals from Europe and Japan. Accordingly, Massad states he believes “we should harmonize those even if it means increasing ours. I would expect us to finalize a rule by the summer, and I expect that we will incorporate a slight delay in the implementation timetable for the rule.”

SFIG strongly advocated for an exemption for financial end-users that meet certain criteria from the margin rules in its comments to the CFTC and prudential regulators last year, as well as for better harmonization between U.S. and European requirements. For additional information, read all SFIG’s advocacy on Derivatives in Securitization or contact to join the Derivatives in Securitization Task Force.


According to a report by the National Real Estate Investor commercial mortgage backed securities (“CMBS”), lenders are offering higher levels of leverage to close deals, especially as prices for apartment properties rise in relation to rents. CMBS lenders now offer larger loans that sometimes cover up to 80 percent of the appraised value of a multifamily property. Interest-only loans are also becoming more common.

The higher leverage loans concern market watchers such as the bond-rating agencies, who are raising credit enhancement levels. B-piece buyers are also pushing back on the amount of interest-only loans contained in CMBS deals.

At the same time, CMBS lenders continue to offer financing to properties and buyers who may not find financing from other sources. Interest rates for CMBS loans continue to be roughly 15 basis points higher than the leading competition for comparable properties—usually provided by Fannie Mae or Freddie Mac lenders, experts say. As a result, most CMBS loans are being made in secondary or tertiary markets to Class-B or lower multifamily properties.

These properties are also showing more strength as the economic recovery is finally spreading towards the relatively low-income renter who rent these apartments, allowing rents to rise.


The Federal Housing Finance Agency (“FHFA”) released a set of enhanced requirements for non-performing loans (“NPLs”) by Freddie Mac and Fannie Mae that are aimed at reducing risk to taxpayers by transferring it to the private sector. These enhanced requirements will require prospective purchasers to prove that they have retained a loan servicer with previous delinquent debt handling experience. The servicers will also be required to offer aid in order to avoid foreclosures as a condition of a sale and must provide reporting on borrower outcomes after the transactions close.

“FHFA believes that the sale of severely delinquent loans through NPL sales will reduce Enterprise losses and improve borrower and neighborhood outcomes.” The requirements are also “expected to encourage broad participation by potential investors and provide for future publication of aggregate data about borrower outcomes.”


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

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

Contact Information

Richard Johns Executive Director

Kristi Leo Investor Relations

Sonny Abbasi Director of MBS Policy

Sairah Burki Director of ABS Policy

Michael Flood Director of Advocacy

Mary Robinson Policy Manager

Alyssa Acevedo Policy Analyst

Amanda Bateman Policy Analyst

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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