May 13, 2015 Newsletter
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May 13, 2015
 

SFIG News

SFIG Calendar

Advocacy Outlook

Industry News Highlights

Upcoming Events in Washington

 
SFIG NEWS
SFIG SUBMITS COMMENTS TO THE EUROPEAN COMMISSION ON HQS

On Wednesday, May 13th, SFIG submitted comments to the European Commission (“EC”) in response to its consultation on an EU framework for simple, transparent and standardized securitization. According to the EC, the development of a high quality securitization market constitutes a key element of its plans to develop a Capital Markets Union in Europe and would promote further integration of EU financial markets, help diversify funding sources and unlock capital, making it easier for banks to lend to households and businesses.

SFIG’s comments were prepared by drafting counsel at Hogan Lovells and developed through its High Quality Securitization (“HQS”) Task Force. To become a member of the HQS Task Force, please contact Amanda.Bateman@sfindustry.org.

 
 
SFIG ANNOUNCES IMN’S ABS EAST 2015 KEYNOTE SPEAKERS

As Lead Association Partner for IMN’s 21st Anniversary ABS East Conference, SFIG is proud to announce the keynote roundtable: A Look Into the Past and a Gaze Into the Future of Residential Mortgage Finance in the U.S.

 Edward DeMarco
Director
FHFA 2009–2014
[Bio]

 

James B. Lockhart III
Director
OFHEO 2006-2009
FHFA 2008–2009
 [Bio]

Armando Falcon Jr.
Director
OFHEO 1999–2005
[Bio]

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, and please contact Christopher Keeping for more information at (212) 901-0533 or ckeeping@imn.org.

 
 
CHINESE REGULATORS RELEASE AUTO AND RMBS DISCLOSURE GUIDELINES

On April 30th, the National Association of Financial Market Institutional Investors (“NAFMII”), released guidelines relating to Personal MBS Information Disclosure and Personal Car Loans ABS Information Disclosure. SFIG will be speaking with NAFMII to provide a U.S. market perspective and various considerations regarding disclosure requirements.

If you would like to join SFIG’s Chinese Market Committee, please contact Alyssa.Acevedo@sfindustry.org.

 
 
SFIG CALENDAR
CREDIT CARD ISSUER COMMITTEE CALL
THURSDAY, May 14, 2015
10:00 a.m. – 11:00 a.m. (ET)
 
 
ADDITIONAL EQUIPMENT ISSUER COMMITTEE CALL
THURSDAY, May 14, 2015
2:00 p.m. - 3:00 p.m. (ET)
 
 
WEEKLY NRSRO DUE DILIGENCE INDUSTRY GUIDE CALL
THURSDAY, May 14, 2015
3:00 p.m. – 4:00 p.m. (ET)
 
 
CHINESE MARKET COMMITTEE CALL
MONDAY, May 18, 2015
9:00 a.m. – 10:00 a.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.
 
 
IMN’s ABS EAST 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 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 the Johnson-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 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 will hold its next call on Monday, May 18th at 9:00 a.m. (ET). These calls continue to focus on a high-level description of 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 meets weekly on 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
SENATOR SHELBY RELEASES FINANCIAL REFORM BILL

Yesterday, May 12th, Senator Richard Shelby (R-AL), Chairman of the Senate Committee on Banking, Housing, & Urban Affairs (“Committee”) released The Financial Regulatory Improvement Act of 2015, a bill aimed at revising several portions of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Important to SFIG members, the bill addresses the following areas:

  1. Section 106: Safe Harbor for qualified mortgages held in portfolio (p. 20); 
  2. Section 116: A study of the regulatory and capital requirements for mortgage servicing assets (p. 36); 
  3. Section 704: Requires the Federal Housing Finance Agency ("FHFA") Director to establish a committee of market participants to advise the agency on the development of a market infrastructure, including a common securitization platform (“CSP”) (p. 152); 
  4. Section 705: Requires the FHFA Director to report annually on development of a CSP, establish a Board of Directors—including industry participants—for the CSP, and transfer the CSP to a non-profit entity within five years of enactment of the bill (p. 152); and 
  5. Section 706: Establishes minimum annual levels of risk sharing, which must be at least 150 percent of the previous year’s level, and at least fifty percent of which must be front-end risk sharing, for securities issued by Fannie Mae and Freddie Mac (p. 161).

A section-by-section summary of the bill can be found here. The full text of the bill can be found here. Senator Shelby has planned a Committee mark-up of the bill on Thursday, May 21st, at 10:00 a.m. (ET).

Please contact Michael.Flood@sfindustry.org with any questions.

 
 
TRADING IN AGENCY MBS SLOWS OVER POSSIBLE LIQUIDITY CONCERNS

As the implementation dates for Dodd-Frank and the Basel III framework approach, trading volume in agency MBS slowed amidst concern regarding capital restrictions. Ron D’Vari, co-founder of NewOak Capital, noted in a National Mortgage News article that large bank broker-dealers are limiting their activity in the sector because of higher capital burdens, saying “[s]ome banks have gotten out of that trading zone, and the ones that are staying are much more careful about allocating their capital.”

The slowdown in trading of agency MBS comes even as Fannie Mae and Freddie Mac continue to increase their issuance. According to the article, analysts note that the slow-down is largely a result of concern over capital and a potential interest rate hike. “The reason we had such a good mortgage finance business in the U.S. is that it was backed by [agency MBS] the most liquid of markets” D’Vari said, but “even the most liquid parts of the market have started to show signs of illiquidity.”

 
 
EUROPE SWITCHES GEARS TO QUANTITATIVE EASING IN LIEU OF ABS PURCHASING PROGRAM

The European Central Bank (“ECB”) has scaled back its ABS purchases, according to figures last week, and is opting instead for full scale quantitative easing to stimulate lending in Europe. According to an article published by the Financial Times on May 7th, central bankers’ limited ability to effect activity in the real economy highlights the challenges the EU faces with respect to its plans to develop a capital markets union in Europe.

The Financial Times points out that while European governments’ failure to guarantee ABS tranches has been part of the problem, “a bigger setback has been the failure to ease significantly the regulatory cost of ABS, which proponents argue reflect outdated perceptions of their riskiness.” While the ECB and Bank of England, European Banking Authority, European Commission, and Basel Committee on Banking Supervision and International Organization of Securities Commissions have sought to introduce a new generation of high quality securitization and proposed preferential treatment for those that qualify, the article also notes that the terminology related to the official initiatives has not yet been agreed upon.

As a result of this uncertainty and the ECB’s decision to slash lending rates to historic lows, European banks remain reluctant to use ABS for funding as it is cheaper for banks to borrow from the central bank instead. Its €60 billion-a-month quantitative easing program has already been more effective at inflating financial asset prices, but as the Financial Times duly asks, “will it be more successful in stimulating the real economy?”

 
 
FHFA DIRECTOR MELVIN L. WATT ANNOUNCES EXTENSION OF HAMP AND HARP

Federal Housing Finance Agency (“FHFA”) Director Melvin L. Watt announced the extension of Fannie Mae and Freddie Mac’s participation in modification and refinance programs at the Greenlining Institutes 22nd Annual Economic Summit. “This enables me to announce today that FHFA has decided to extend the Enterprises’ participation in the Home Affordable Modification Program (“HAMP”) and the Home Affordable Refinance Program (“HARP”) for an additional year, until the end of 2016” said Watt. HAMP and HARP were initially launched in 2009 to provide modifications that allow borrowers significant payment reductions and also allow borrowers to refinance their loans. Watt told the audience that this will be the final extension for HAMP and the FHFA anticipates that this will be the final extension for HARP.

During the extension the FHFA will be reviewing which solutions and tools it will implement from each of the programs. Regarding HAMP, “We have determined that it is appropriate to maintain the Enterprises’ streamlined modification program as part of their loss mitigation toolkit” and “for HARP, we are also going to use this time to explore possible streamlined refinance solutions for future Enterprise loans” said Watt. The FHFA believes that Fannie Mae and Freddie Mac’s most important role is in supporting affordable rental housing and other underserved market areas in the multifamily market. To support this effort, the FHFA is working to publish its final housing goals rule and re–propose its duty to serve rule in the next few months.

 
 
UPCOMING EVENTS IN WASHINGTON
SENATE COMMITTEE ON BANKING, HOUSING, & URBAN AFFAIRS EXECUTIVE SESSION TO MARK-UP ORIGINAL LEGISLATION ENTITLED “THE FINANCIAL REGULATORY IMPROVEMENT ACT OF 2015”
THURSDAY, May 21, 2015
10:00 a.m. – 12:00 p.m. (ET)
Dirksen Senate Office Building, Room 538
Additional information may be found here.
 
 
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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