March 5, 2014 Newsletter
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March 5, 2014


SFIG Calendar

Advocacy Outlook

Issue Spotlight

Recent Developments

Upcoming Events in Washington

SFIG will respond to the proposal on asset-level disclosures issued by the Securities and Exchange Commission (SEC) on February 25, 2014. (For additional details on this approach please see the staff memorandum included in the public comment file.) Given that comments are due on March 28, 2014, SFIG is moving forward as expeditiously as possible. This week, asset class committees are meeting to identify concerns and build individual committee perspectives. Next week, the Regulation AB II Task Force will begin a series of meetings aimed at including those individual committee perspectives in the final comment letter.
On February 27, 2014, the Structured Finance Industry Group (SFIG) attended a meeting on a Framework on Housing Finance Reform hosted by the General Accounting Office (GAO). The GAO is conducting analysis on the key issues in housing finance reform due to the various legislative proposals set forth by both houses of Congress. While not specifically analyzing any contemplated legislation, the GAO indicated it wants to set forth key principles that are needed in a future state. Several other trade organizations were also invited to attend including the National Association of Realtors, the Association of Mortgage Investors and the National Association of Homebuilders. Participants uniformly indicated the importance of a TBA market, a catastrophic government guarantee, gradual transition to a new system and preservation of the 30 year fixed-rate mortgage as guiding principles.

SFIG expressed similar views in both its testimony before the Senate Banking Committee and its responses to the Senate Banking Committee Stakeholder questions in the fall of 2013. Through its GSE Reform Subcommittee and RMBS Committee, SFIG is working on formulating policy recommendations to be used in responding to any proposed legislation. We anticipate Senator Tim Johnson (D-SD) and Ranking Member Michael Crapo (R-ID) will propose legislation in the first quarter of 2014. Industry participants believe that this legislation will build on the legislation proposed by Senator Mark Warner (D-VA) and Senator Bob Corker (R-TN).

For information about SFIG’s GSE reform efforts, please contact or

WEDNESDAY, March 5, 2014
12:00 p.m. – 5:00 p.m. (EST)
New York, NY
Note: Closed Meeting

TUESDAY, March 11, 2014
12:00 p.m. (EST)
Dial In: 1-800-882-3610 // Code: 2348065

THURSDAY, March 13, 2014
11:00 a.m. (EST)
Dial In (Toll): 412-380-2000 // Code: 3585438

MONDAY, April 7, 2014
10:00 a.m. – 4:00 p.m. (EST)
New York, NY
Note: Closed Meeting

TUESDAY, April 15, 2014
Time and Agenda to be announced
McCarthy Tétrault LLP
66 Wellington Street West #5300
Toronto, ON M5K 1E6
Note: Closed to Press

WEDNESDAY, May 14, 2014
Time and Agenda to be announced
Société Générale
245 Park Avenue, New York, NY

June 10-12, 2014
Barcelona International Convention Centre
Barcelona, Spain

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.

Reg AB II SFIG will respond to the proposal on asset-level disclosures issued by the Securities and Exchange Commission (SEC) on February 25, 2014. (For additional details on this approach please see the staff memorandum included in the public comment file.) Given that comments are due on March 28, 2014, SFIG is moving forward as expeditiously as possible. This week, asset class committees are meeting to identify concerns and build individual committee perspectives. On Tuesday, March 11, 2014 the Regulation AB II Task Force will have its first call. The goal of these calls will be to identify common positions; note differences in opinion; and build consensus where possible across membership. Please contact with any questions.

Project RMBS 3.0 Working Groups have begun meeting via conference call. The Working Groups will further develop the project agenda towork towards restoring private capital back into the market by providing effective recommendations on issues related to representations and warranties. The project is organized into three subcommittees: 1) Representations, Warranties and Repurchase Enforcement; 2) Due Diligence/Loan Review, Data and Disclosure; and 3) Role of Trustees and Bondholder Communications. We encourage members to participate in any or all of the Working Groups to contribute towards the mission of Project RMBS 3.0. Please contact to join a Working Group or with any additional questions on Project RMBS 3.0.

SFIG’s GSE Reform Subcommittee has formulated policy recommendations that will form the basis for SFIG’s position as Congress moves forward with Housing Finance Reform. Last week, the full RMBS Committee adopted preliminary policy positions on credit risk transactions and the transition to a reformed state for housing finance. SFIG is currently drafting an executive summary outlining our emerging views on the issues above as well as those relating to the common securitization platform, guarantors, co-operatives and the TBA market. If you would like to learn more about SFIG’s activities with respect to GSE Reform, please contact

SFIG’s Mortgage Loan-Level Disclosure Subcommittee has reviewed and developed additional data elements for potential disclosure. SFIG will use this work as a basis of discussions and correspondence with the Securities and Exchange Commission on the mortgage aspects of Regulation AB II. SFIG continues to have weekly Mortgage Industry Standards Maintenance Organization calls to go through data elements that lenders should deliver in securitizations. Please contact for additional information on SFIG’s work on this topic.

SFIG is working with the Global Financial Markets Association, Institute for International Finance, and Commercial Real Estate Finance Council on a comment letter to the Basel Committee on Bank Supervision (BCBS) in response to its Second Consultative Document, Revisions to the Securitization Framework. Weekly conference calls are underway to facilitate this collaborative effort and identify relevant data that will demonstrate the potential impact of BCBS’s recommendations for the industry. SFIG’s work on this project is being undertaken through the Regulatory Capital and Liquidity Committee. Please contact for additional information.

SFIG is continuing to engage with regulators and legislators on our concerns regarding the Liquidity Coverage Ratio proposal. Please contact with your questions or comments.

The Volcker Task Force is working with the asset class committees to determine key issues and need for interpretative guidance regarding the Volcker Rule. The Task Force is also collaborating with the CLO Committee to develop recommendations regarding a legislative fix for CLOs recently proposed by Congressman Barr (R-KY). Please contact for additional information on the Volcker Task Force.

The Regulatory Capital and Liquidity Committee will hold regular calls to develop a comment letter in response to the Basel Net Stable Funding Ratio (NSFR) proposal. The proposed NSFR seeks to ensure banks have a fortified balance sheet (in particular, one that is not overly reliant on short-term funding). The NSFR Working Group will develop a comment letter to reflect the concern and position of SFIG members regarding the proposed revisions to the NSFR. Comments are due April 11, 2014.

Please see the SFIG Calendar for additional information on upcoming NSFR Working Group calls. If you have additional questions on the NSFR proposal or would like to participate in the Working Group, please email

The Risk Retention Committee is continuing to follow up with regulators on risk retention questions across asset classes. Topics currently under discussion include participations, representative sample and the simplified approach. Please email with any questions.

SFIG is continuing to build membership for its Chinese Market Committee among its members and is currently looking to establish committee chairs as well. If you would like more information on SFIG’s work with respect to Chinese securitization, please contact

SFIG has launched its initiative to provide critically needed input for the Financial Stability Board’s “Shadow Banking” project. For more information on SFIG’s work on Shadow Banking, please contact

On February 26, 2014, House Ways & Means Committee Chairman David Camp (R-MI) released his proposal to reform the United States tax code for both individuals and corporations. Chairman Camp’s goals for tax reform are: (1) to reduce tax rates in order to make it simpler and fairer for individuals, while creating a more competitive tax rate (with other nations) for corporations, and (2) to ensure that the tax code is “revenue neutral,” or brings in the same amount of revenue to the Federal government as it receives now.

Specifically, Chairman Camp proposes that the current seven individual tax rates (10 percent, 15 percent, 25 percent, 28 percent, 33 percent, 35 percent and 39.6 percent) be reduced to three (10 percent, 25 percent and 35 percent). For corporate tax rates, the Chairman proposes a reduction in the highest tax rate from 35 percent to 25 percent.

In order to accomplish both goals, Chairman Camp’s draft bill eliminates, modifies or repeals hundreds of industry-based tax credits, exemptions and carve-outs.

Chairman Camp’s proposal–if passed–would indirectly affect the tax treatment of certain collateral underlying automotive, student, residential and commercial loans that comprise asset-backed securities (ABS). The bill also addresses the tax status of real-estate investment trusts (REITs), carried interest and imposes a 3.5 basis-point tax on total consolidated bank assets exceeding $500 billion.

Important to SFIG members, the bill proposes the following significant tax changes:

Residential Mortgage Loans: The Chairman’s proposal would make significant changes to both the sale of a primary residence as well as to the amount of interest that could be deducted from income tax for individuals. Currently, taxpayers can exclude from gross income up to $500,000 for joint filers of any gain from the sale of a primary residence. Under the proposal, the exclusion would be phased out by one dollar for every dollar that a family’s income exceeds $500,000. Further, a taxpayer would have to use the residence as a primary residence for five out of the past eight years.

For mortgage interest, a taxpayer may still claim an itemized deduction. However, the Chairman’s plan would reduce the mortgage loan limit from $1,000,000 to $500,000 phased in over four years. The $500,000 loan limit would not be adjusted for inflation. Interest on home equity would be eliminated over a four-year period.

The proposal would also, (a) repeal the residential energy efficiency property credit, (b) limit exclusions for employer provided housing allowances, (c) eliminate the ability to deduct state and local real estate taxes and (d) repeal the first-time homebuyer credit.

Commercial Mortgage Loans: Chairman Camp’s tax plan proposes three significant changes for commercial real estate. First, the Camp plan repeals the modified accelerated cost recovery system (MACRS), which allows for a 39-year depreciable life for non-residential real estate (and 27.5 years for residential). The plan replaces this provision with a 40-year depreciable life for all real estate, using the straight-line method.

Second, the plan repeals the capital gains deferment for “1031 Like Kind Exchanges.” Currently, the like-kind exchange rule allows taxpayers to defer capital gains on property if that property is exchanged for a similar property. This tax proposal would apply to both partnership distributions and interest.

Third, the proposal modifies the tax treatment of carried interest. Certain partnership interests held in connection with the performance of services would define a portion of the capital gains as ordinary interest and therefore tax it as such. However, partnerships engaged in real property trade or business would be excluded from the proposed tax treatment.

Real Estate Investment Trusts (REITs): For REITs, the proposal aims to both (a) prevent companies from using REITs to avoid corporate income taxes, and (b) ensure that the REIT structure is used appropriately as a tax-efficient vehicle for “average investors to acquire diversified and passive interests in real estate.”

Student Loans: The Camp proposal would make three significant changes to the tax code for students taking out loans to pay for higher education. First, it would repeal the deduction for interest on education loans. Second, it would also repeal the exemption for most student loan forgiveness program, which helps employers who pay their employees’ education expenses. Third, it would tax limit to $1,200 the amount of a student employee’s earnings that are exempted from Social Security tax.

The proposal would also combine many education related tax breaks and make permanent the American Opportunity Tax Credit in order to make college more accessible to low-income students. This credit would be available only for the first four years of college.

Automotive Loans: The Camp proposal repeals four tax provisions that have been used to incentivize consumers to buy more energy efficient automobiles. First, the bill would repeal the tax provision that allows consumers to claim a 10 percent credit for the cost of a qualified plug-in electric-drive motor vehicle. Second, the bill would repeal the credit a taxpayer may claim for each new qualified fuel cell vehicle, hybrid vehicle, advanced lean burn technology vehicle, and alternative fuel vehicle. Third, Camp’s plan would repeal the 30 percent credit (with a cap at $30,000) that taxpayers may claim for the cost of installing qualified clean-fuel vehicle refueling property that is used for trade or business purposes. Finally, the bill would repeal a taxpayer credit for each qualified plug-in electric drive motor vehicles. The Joint Committee on Taxation believes that repeal of this final provision alone will increase Federal revenues by $5 billion over ten years.

Bank Tax: Finally, Camp’s bill would create a new tax on financial firms with assets greater than $500 billion that have been labeled by U.S. regulators as “systemically important” to the stability of the broader economy. It would require they pay a quarterly excise tax equal to 0.035 percent of their total consolidated assets that exceed the $500 billion threshold. The provision would raise $86.4 billion over the next 10 years, according to a summary of the bill that cited an estimate from the Joint Committee on Taxation. However, it could also affect the amount of lending and investing that systemically important institutions may be able to provide.

SFIG Analysis: Camp’s proposal is the largest attempt to reform the U.S. tax code since 1986, and many provisions indirectly affect the securitization industry. While the bill itself stands little chance of passing Congress this year, the 979-page proposal does outline a long list of tax increases and repeals that could be used as one-off “pay-for” provisions for other bills.

Furthermore, the bill sets a benchmark for future debates on tax reform. As such, SFIG will be following any progress made on tax reform and further analyzing the draft legislation to understand its effects on the securitization market.

For questions, please contact For additional details, a Section-by-Section Summary is available from the House Ways and Means website.

The Federal Deposit Insurance Corporation (FDIC) announced procedures that it will use to ascertain whether financial institutions are complying with a slew of mortgage loan rules established under the Dodd-Frank Act. Among the rules listed in its Financial Institution Letter from February 25, 2014 that fall under the examiners jurisdiction are the Qualified Mortgage Rule; Loan Originator Compensation Rule; Mortgage Servicing Rules, which implement amendments to the Real Estate Settlement Procedures Act (RESPA) and the Truth in Lending Act (TILA); High Cost Mortgage and Homeownership Counseling Amendments Rule, which also amends consumer protection provisions in RESPA and TILA; Higher-Priced Mortgage Loan (HPML) Escrow Rule; HPML Appraisal Rule; and Equal Credit Opportunity Act (ECOA) Appraisal Rule.

Examiners expect all FDIC-supervised institutions with assets totaling less than $1 billion to be familiar with the rules and have a plan for implementing practices to comply with them. The implementation plans should include clear timeframes and benchmarks for making necessary changes. According to the announcement, overall compliance will be considered, but examiners will also take into account the level of progress institutions have made in implementing their plans.

A report released on February 27, 2014 by the Consumer Financial Protection Bureau (CFPB) found that incorrect credit reporting contributed to a substantial majority of consumer complaints that it has handled to date. Out of approximately 31,000 complaints that the CFPB received from consumers between October 22, 2012 and February 1, 2014, nearly three-quarters were due to accuracy issues, and more than a third of these related to incorrect account statuses. Credit reporting agencies handling of disputes and the inability to access their free annual credit report were the next major sources of consumer angst, contributing to 11 percent and 10 percent, respectively, of complaints the CFPB dealt with during that time.

In response to the findings, CFPB Director Richard Cordray sent a letter to credit card companies urging them to make credit scores and related content freely available to consumers. He points out that several credit card issuers have already introduced such programs, calling it a “best practice” in the industry. According to Cordray, making consumers aware of their scores could lead them to “take the initiative to request their credit reports, address concerns, investigate errors or fraud-related entries, and improve negative aspects of their credit usage.”

On March 4, 2014, the President proposed a $3.901 trillion budget which mentioned no need for another taxpayer bailout for the Federal Housing Administration (FHA) this year. The FHA has raised more funds and reduced the amount of loans it insures, thus eliminating a need for another bailout. SFIG will be analyzing the President’s budget release to understand the impact on the securitization market and will follow up next week.

Please see The President's Budget for Fiscal Year 2015 for additional information.

Commenting on Fannie Mae’s earnings release, House Financial Services Committee Ranking Member Maxine Waters (D-CA) indicated that she will be working with fellow Democratic members of the Committee to introduce legislation on housing finance reform. Representative Waters indicated that her proposal would take into account the changing market conditions since the credit crisis. She stated in a press release that the proposal will preserve the 30 year fixed-rate mortgage and provide an explicit government guarantee that is paid for by the industry.

Some industry participants have used GSE profitability to support their argument that the GSEs should be recapitalized and preserved. The Obama Administration is opposed to recapitalizing the GSEs and is presently supporting a Senate Banking Committee effort to create a new secondary market agency to replace the GSEs. The Senate legislation is being drafted under the leadership of Chairman Tim Johnson (D-SD) and Ranking Member Mike Crapo (R-IA) and is expected to be released in late March, according to a recent statement Senator Crapo made to the media.

On February 25, 2014, the Senate Committee on Banking, Housing and Urban Affairs held its second hearing to determine whether or not the Terrorism Risk Insurance Act (TRIA) should be reauthorized before it expires at the end of this year. The program, administered by the Department of Treasury, was established at the end of 2002 in light of the damages caused by the September 11th attacks. The resulting losses fell primarily on reinsurers and as they pulled out of the terrorism insurance market, insurers began carving out exemptions for covering such events in their policies. The subsequent TRIA legislation provided “for a transparent system of shared public and private compensation for insured losses resulting from acts of terrorism.”

The Terrorism Risk Insurance Program was designed to be temporary and allow for a transitional period during which the private markets could stabilize, resume coverage of the insurance and establish a system of its own to handle future losses. The program has been reauthorized twice, first in 2005 then again in 2007. During the hearing last Tuesday, Senator Tom Coburn (R-OK) questioned why an industry solution has not happened yet. However, as Carolyn Snowtestifying on behalf of the Risk and Insurance Management Societypointed out, “9/11 proved that the private insurance market alone is unlikely to provide adequate and affordable coverage.” She and other industry representatives also commented on the need for certainty in both the short and long term, explaining that “some policyholders are being offered stand-alone policies for the period extending beyond 2014, but with deductibles or premiums that are non-refundable should TRIA be reauthorized at a later date.”

Last week, the Federal Housing Finance Agency (FHFA) announced that Fannie Mae board member Egbert L.J. Perry has been appointed as the next Chairman of the Board of Directors. According to the February 25th news release, the current chairman Philip Laskawy has reached the company’s mandatory retirement age and will therefore step down effective March 31, 2014.

Laskawy became chairman in 2008 during a tumultuous time for the GSE and the U.S. housing market. FHFA Director Mel Watt praised the outgoing leader, noting that during his tenure “Fannie Mae has helped millions of American families refinance their mortgages, buy new homes, rent affordable housing and avoid foreclosure,” and ultimately saw the company achieve record financial results. President and Chief Executive Officer Timothy Mayopoulos also expressed deep gratitude for his “leadership, passion and integrity” while expressing his conviction that the progress would continue under Perry’s guidance.

The FHFA announcement describes Perry as a seasoned veteran in the industry who has played an important role in many public-private partnerships. His extensive experience, which includes 35 years as a real-estate professional and seven years as a director of the Federal Reserve Bank of Atlanta, will be crucial as the company adapts in response to housing finance reform legislation.

The House of Representatives is expected to vote this week on H.R. 3370, the Homeowner Flood Insurance Affordability Act of 2013. The Senate passed its own relief bill by a vote of 67-32 in 2013.

The bill was posted late Friday evening, after bipartisan negotiations concluded. The revised bill contains language that would limit annual premium increases to 18 percent. The bill also orders FEMA to “strive to minimize the number of policies with annual premiums that exceed 1 percent of the total coverage provided by the policy.”

H.R. 3370 has 238 co-sponsors and is expected to pass the House. Once passed, the House and Senate will likely conference to deliberate on differences between the two bills.

WEDNESDAY, March 19, 2014
9:00 a.m. – 10:30 a.m. (EST)
Bipartisan Policy Center - Washington, DC
Panelists will discuss how the Congressional Budget Office and Office of Management and Budget currently account for the GSEs’ impact on the federal budget, and the potential budget implications of provisions in current GSE reform legislation, including the wind-down and elimination of Fannie Mae and Freddie Mac.

Registration for the event is open to the public.



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 Senior Policy Analyst

Alyssa Acevedo Policy Analyst

Amanda Bateman Policy Analyst

Jennifer Serpas Office Manager

Allison Creswell Executive Administration

1775 Pennsylvania Ave. NW
Suite 625
Washington, DC 20006

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