May 14, 2014 Newsletter
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May 14, 2014
 

SFIG News

SFIG Calendar

Advocacy Outlook

Recent Developments

Upcoming Events in Washington

 
SFIG NEWS
SFIG SPRING SYMPOSIUM TAKING PLACE TODAY IN NEW YORK
SFIG is holding its Spring Symposium today at Société Générale’s New York offices. The symposium is designed to discuss the Regulation AB II proposals and SFIG’s response. The event is open to both members and non-members, but attendance is limited to those who pre-registered for the event. Please note, this event is closed to the press.

The full Spring Symposium agenda is available here.

 
 
SFIG MEETS WITH CFTC TO DISCUSS NO-ACTION REQUEST FOR LEGACY SPV SWAPS
SFIG members and staff met with the Division of Swap Dealer and Intermediary Oversight (Division) at the Commodity Futures Trading Commission (CFTC) on Tuesday. The discussion centered around the possibility of no-action request; i.e. that the Division agree not to recommend that the CFTC take enforcement action against a registered swap dealer for failing to comply with any regulations that may become applicable to a legacy SPV swap solely as a result of actions taken to address, or in anticipation of, a credit rating downgrade of the swap dealer. For additional information, please contact Sairah.Burki@sfindusty.org.
 
 
SFIG MEETS WITH JOINT AGENCIES TO DISCUSS RISK RETENTION RE-PROPOSAL CONCEPTS
Last Thursday, SFIG members and staff held a call with regulators from the Federal Deposit Insurance Corporation, the Securities and Exchange Commission, the Federal Housing Finance Agency, the Board of Governors of the Federal Reserve System, and the U.S. Department of the Treasury. The meeting focused on providing more details regarding the participations section of the SFIG risk retention comment letter submitted on October 30, 2013, as well as a reconsideration of representative sample as an acceptable form of Risk Retention.

SFIG will continue to respond to specific regulator questions with regard to Risk Retention.

If you are interested in joining the Risk Retention Task Force, please contact Alyssa.Acevedo@sfindustry.org.

 
 
ONLY A FEW DAYS LEFT TO SUBMIT YOUR NOMINATIONS FOR SFIG BOARD AND FOR COMMITTEE CHAIRS
SFIG is still accepting nominations for its Board of Directors and for Committee Chairs. The nomination process will close on Monday, May 19th.  As a reminder, eligibility for these positions is limited to individuals associated with SFIG’s primary members.  Members may nominate themselves or another qualified industry participant. For multiple nominations, please fill out a form for each submission.

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 reflective of the membership and the industry at large, and that is committed to working hard and advancing the principles of SFIG.

Board of Director terms are for two years, and Committee Chair terms are for one year.

There are two types of committees, those which are open to all industry participants (open committees) and those which are only open to specific industry participants (closed committees). Click here for a list of SFIG Committees. If you have any questions or require any clarification around the nominating process, please email committees@sfindustry.org.

Click here to submit your nominations.

 
 
SFIG CALENDAR
PROJECT RMBS 3.0 DUE DILIGENCE, DATA AND DISCLOSURES WORKING GROUP CONFERENCE CALL (BI-WEEKLY)
WEDNESDAY, MAY 21, 2014
4:00 p.m. – 5:00 p.m. (EST)
 
 
PROJECT RMBS 3.0 ROLE OF THE TRUSTEE/BONDHOLDER COMMUNICATIONS WORKING GROUP CONFERENCE CALL (BI-WEEKLY)
THURSDAY, MAY 22, 2014
3:00 p.m. – 4:00 p.m. (EST)
 
 
PROJECT RMBS 3.0 REPRESENTATIONS, WARRANTIES, AND REPURCHASE ENFORCEMENT WORKING GROUP CONFERENCE CALL (BI-WEEKLY)
THURSDAY, MAY 22, 2014
4:00 p.m. – 5:00 p.m. (EST)
 
 
IMN 2014 GLOBAL ABS CONFERENCE
TUESDAY, June 10, 2014 – THURSDAY, June 12, 2014
Barcelona International Convention Centre
Barcelona, Spain
Registration available here
 
 
SFIG BOARD OF DIRECTORS MEETING Q2’14
TUESDAY, June 24, 2014
12:00 p.m. – 5:00 p.m. (EST)
New York, NY
Note: Closed Meeting
 
 
IMN ABS EAST 2014 CONFERENCE
SUNDAY, September 21, 2014 – TUESDAY, September 23, 2014
The Fontainebleau Hotel
Miami Beach, FL
Registration available here
 
 
SFIG & IMN ABS VEGAS 2015
SUNDAY, February 8, 2015 – WEDNESDAY, February 11, 2015
The Aria Resort and Casino
Las Vegas, NV
Registration 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.

Project RMBS 3.0 continues to work towards bringing private label securities back to the mortgage market. Working Groups conduct regular meetings via conference call to address issues specific to private label mortgage securities in the following categories: 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 Mary.Robinson@sfindustry.org to join a Working Group or with any additional questions on Project RMBS 3.0.

The GSE Reform Task Force recently finalized SFIG’s policy positions as they relate to the proposed Johnson-Crapo legislation for housing finance reform. The Task Force has met regularly since the bill was initially released on March 16, 2014 and will reconvene in the event of new developments from the Senate Committee on Banking, Housing, and Urban Affairs as it moves forward with the proposal. If you would like to learn more about SFIG’s activities with respect to GSE Reform, please contact Amanda.Bateman@sfindustry.org.

The 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 Alyssa.Acevedo@sfindustry.org for additional information on SFIG’s work on this topic.

The Volcker Task Force is working with SFIG’s various asset class committees to determine key issues and the need for interpretative guidance regarding the Volcker Rule. Please contact Amanda.Bateman@sfindustry.org for additional information on the Volcker Task Force.

The Risk Retention Committee is continuing to follow up with regulators on risk retention questions across asset classes. Topics currently under discussion include participations and representative sample approaches. Please contact Alyssa.Acevedo@sfindustry.org with any questions.

SFIG is continuing to build membership for its Chinese Market Committee. If you would like more information on SFIG’s work with respect to Chinese securitization, please contact Alyssa.Acevedo@sfindustry.org.

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 Amanda.Bateman@sfindustry.org.

The Derivatives in Securitization Task Force met with the Commodity Futures Trading Commission to discuss a no-action request regarding enforcement against a registered swap dealer for failing to comply with regulations that may become applicable to legacy SPV swaps pursuant to a credit rating downgrade of a swap dealer on May 13th. SFIG members who are interested in participating in this initiative should email Amanda.Bateman@sfindustry.org.

 
 
RECENT DEVELOPMENTS
FEDERAL RESERVE GOVERNOR TARULLO CALLS FOR UPDATES ON BANKING REGULATION, POSSIBLE ELIMINATION OF INTERNAL RATINGS-BASED APPROACH
In a May 8th speech, Federal Reserve Board Governor Daniel Tarullo called for modifications and eliminations of the current bank supervision provisions. Tarullo’s remarks focused in part on the Basel II internal ratings-based (IRB) approach to risk weighted capital requirements. Tarullo said that the IRB approach “contributes little to market understanding of large banks’ balance sheets and thus fails to strengthen market discipline” and creates “manifold risks of gaming, mistake, and monitoring difficulty.”

The Basel IRB approach, which was first established in 2004, allows banks to use their own risk exposure analysis and asset quality ratings to determine capital requirements. Tarullo noted that “at the time of its development the IRB approach seemed intended to result in a modest decline in risk-weighted capital requirements, a goal that the financial crisis revealed to be badly misguided.” The IRB approach is applied to all U.S. bank holding companies with $250 billion or more in assets.

In his remarks, Tarullo said the IRB approach provides a “short, backward-looking basis” for risk calculation that is “excessively pro-cyclical and insufficiently sensitive to tail risk.” Tarullo expressed his belief that the U.S. should “consider discarding the IRB approach” and instead argued that other regulatory developments, such as supervisory stress testing, provide a better risk management framework. “The supervisory stress tests developed by the Federal Reserve over the past five years provide a much better risk-sensitive basis for setting minimum capital requirements,” said Tarullo. Basel III also incorporates stress testing requirements, and Tarullo said “[t]here is no reason to believe that the task of creating an oversight and review framework for supervisory stress testing would be any more difficult” than dealing with the problems he attributed to the IRB approach.

In addition to issuing comments on the IRB approach, Tarullo also suggested adjusting the Federal Reserve’s oversight and review framework to avoid “supervisory trickle down” to smaller banks. Tarullo said that, under the current structure, there may be scenarios “where supervisors informally, and perhaps not wholly intentionally, create compliance expectations for smaller banks that resemble expectations created for larger institutions.” To this end, Tarullo suggested doubling the current $50 billion threshold for considering whether a bank is systemically important. “If the line were redrawn to a higher figure, we might explore simpler methods for promoting macroprudential aims with respect to banks above $10 billion in assets but below the new threshold,” he said.

 
 
FHFA DIRECTOR WATT SHARES 2014 REGULATORY GOALS
Yesterday, Federal Housing Finance Agency (FHFA) Director Mel Watt delivered his first remarks on FHFA’s role and regulatory goals for 2014. Overall, Director Watt was clear in stating that the FHFA’s role is to regulate the “present state” of the Federal Home Loan Banks (FHLBs) and government-sponsored enterprises (GSEs). “My guess is that there were many people who expected that I would start talking about reform legislation the minute I got to FHFA. I am well aware, and regularly express my belief, that conservatorship should never be viewed as permanent or as a desirable end state and that housing finance reform is necessary. However, Congress and the Administration have the important job of deciding on housing finance reform legislation, not FHFA,” stated Watt.

At the same time, Director Watt stated that FHFA has released its strategic plan for the GSE conservatorships, and it is based upon three goals:

  1. Maintain, in a safe and sound manner, foreclosure prevention activities and credit availability for new and refinanced mortgages to foster liquid, efficient, competitive and resilient national housing finance markets;
  2. Reduce taxpayer risk through increasing the role of private capital in the mortgage market; and
  3. Build a new single-family securitization infrastructure for use by the GSEs and adaptable for use by other participants in the secondary market in the future.

For the first goal, Director Watt emphasized that the agency will focus its efforts to ensure that the GSEs (a) improve liquidity in the single-family housing market, (b) improve servicing standards and foreclosure prevention acts, and (c) provide critical service to the multifamily affordable housing sector. Director Watt specifically focused his comments on representation and warranty standards and repurchase triggers for GSE loans. “I know that repurchase risk remains a top concern for the mortgage industry,” stated Watt. Mr. Watt also stated that the FHFA will neither be exercising its authority to reduce the conforming loan limits, nor be changing eligibility requirements for the Home Affordable Refinance Program. As for multifamily, the FHFA will not require a reduction of the GSEs portfolios, though market competition may drive lower market share.

Important to SFIG members, FHFA’s second goal is focused on reducing taxpayer exposure by bringing additional private capital into the housing finance system through risk-transfer structures and portfolio reductions. First, the FHFA will require the GSEs to triple the amount of risk transfers from $30 billion in unpaid principal balance (UPB) to $90 billion in UPB in 2014. “We also expect each Enterprise to try new risk transfer structures to assess sustainability in different market conditions,” stated Watt.

Finally, the FHFA will concentrate its efforts on building the Common Securitization Platform for Residential Mortgage Backed Securities issued by the GSEs. At the same time, the FHFA wants the GSEs to move towards a single common security. “A successful outcome will be a seamless transition from the current in-house systems that issue new securities at each Enterprise to a future joint venture owned by Fannie Mae and Freddie Mac that operates one system with updated technology.”

Director Watt also indicated that there would be no reductions in the conforming loan balance limit.  He concluded by stating that the FHFA will soon release a “request for input” on the guarantee fees charged by the GSEs.

SFIG staff attended FHFA Director Watt’s speech; for additional information on Director Watt’s remarks or to become involved in SFIG’s housing finance reform efforts, contact Amanda.Bateman@sfindustry.org.
 
 
HOUSING FINANCE REFORM MARKUP TOMORROW
On May 15, 2014 at 10:00 a.m. (EST), the Senate Committee on Banking, Housing, and Urban Affairs (Committee) will reconvene to markup S.1217, the Housing Finance Reform and Taxpayer Protection Act. A webcast of the markup will be available on the Committee website. Senator Tim Johnson (D-SD), Chairman of the Committee, and Senator Mike Crapo (R-ID), Ranking Member of the Committee, introduced legislation to wind down Fannie Mae and Freddie Mac and replace them with a new regulator which would provide for a catastrophic government guarantee after private capital absorbs a 10 percent first loss position. This legislation was based on a similar bill proposed by Senator Bob Corker (R-TN) and Senator Mark Warner (D-VA). 

SFIG recently published its briefing book containing its policy positions on the Johnson-Crapo legislation. For a further description of the legislative process, including a description of a markup and a manager’s amendment, please see our recent issue spotlight. SFIG has also released a comparison of the major housing finance bills introduced in both houses of Congress. To join the GSE Reform Task Force, please email Amanda.Bateman@sfindustry.org.

 
 
HOUSE FINANCIAL SERVICES REPUBLICANS ASK FSB, FSOC FOR MORE INFORMATION ON G-SIFI DESIGNATIONS
Last week, House Financial Services Committee Chairman Jeb Hensarling (R-TX), along with his five subcommittee chairmen, including Scott Garrett (R-NJ), sent a letter to members of the Financial Stability Board (FSB) and Financial Stability Oversight Council (FSOC) with their concerns about the FSB’s process for designating U.S. firms as Globally Systemically Important Financial Institutions (G-SIFIs). “While we agree that robust communication between U.S. regulators and their overseas counterparts is important for global financial stability, we have concerns that decisions are being made that could have significant impact on the U.S. economy and its citizens through a nontransparent process, by an international body that is not accountable to the American people,” states the letter.

Specifically, the chairmen stated three main concerns with the FSB’s process to date:

  • Lack of transparency and due process in the designation of firms as SIFIs or G-SIFIs;
  • Types of firms being considered for designation and why; and
  • Consequences of designation on individual companies, industries and the economy as a whole.

According to the letter, companies that are being considered for designation have stated that they “have not been able to meet with voting members to discuss their potential designation.” Therefore, they ask that the FSOC and FSB take the following actions before any further designations:

  • Explain in detail the process by which designations occur;
  • Provide specific metrics to support any designations;
  • Clarify capital standards applicable to designated insurance companies;
  • Offer to meet with firms being considered for designation;
  • Allow all regulatory members of the FSOC to participated in its deliberations;
  • Clarify the “national authority” designation and explain how it is implemented; and
  • Provide more transparency on all of their activities.

The letter follows up to Congressman Garrett’s calls during the hearing process for FSOC transparency on SIFI status.

 
 
FSOC ANNUAL REPORT HIGHLIGHTS RISKS POSED BY SHADOW BANKING
On May 7, 2014, the Financial Stability Oversight Council (FSOC) released its 2014 Annual Report detailing the risks to financial stability that could arise from large, interconnected bank holding companies or nonbanking financial companies, or that could arise outside the financial services marketplace. The FSOC, a financial watchdog organization chaired by the Secretary of the Treasury, is required by the Dodd-Frank Wall Street Reform and Consumer Protection Act to report annually on its own, financial market and regulatory developments, emerging threats to financial stability, and its subsequent recommendations.

FSOC cites a number of key regulatory milestones that have been reached in bank and nonbank financial institutions reform, the latter set of institutions increasingly referred to as “shadow banks.” These reforms include the finalization of the Volcker Rule, bank capital rules, a supplementary leverage ratio for the largest banks and bank holding companies, enhanced prudential standards for the U.S. operations of large foreign banks, and the advent of clearing, trading and registration requirements for short-term liquidity coverage for swap markets. Ongoing initiatives highlighted in the report include proposed rulemakings on money market fund (MMFs) reform, risk retention for securitizations, and requirements for short-term liquidity coverage for large banking organizations. Reductions have occurred in intraday credit exposures in the tri-party repurchase agreement (repo) market and work on an orderly liquidation authority progresses. Finally, three nonbank financial institutions have been designated as subject to prudential standards and supervision by the Federal Reserve Board.

According to the FSOC, these developments may have resulted in a more resilient financial system, but significant threats and areas of reform remain. Though the term “shadow banking” is not explicitly used in the report, risks of activities described as such clearly serve as its focus. The risk of runs on MMFs remains high, as does the risk of tri-party repo collateral fire sales. FSOC cites a number of other challenges that remain: the evolution of the financial system has encouraged the development of products and services developed to circumnavigate regulations; the availability and quality of data continues to need improvement; low interest rates has resulted in banks easing their underwriting standards; and housing finance reform remains unresolved.

According to the FSOC, adopting its recommendations for the oversight of financial firms and markets will encourage the private sector to employ sound financial risk management practices that will mitigate potential risks to the stability of the U.S. The report is signed by top officials from the Treasury Department, Board of Governors of the Federal Reserve System, Office of the Comptroller of the Currency, Consumer Financial Protection Bureau, Securities and Exchange Commission, Federal Deposit Insurance Corporation, Commodity Futures Trading Commission, Federal Housing Finance Agency and National Credit Union Administration as well as an independent member of the FSOC with insurance expertise.

 
 
FINANCIAL STABILITY RISKS RISE FROM “SHADOW” FIRMS
According to a new a paper by Federal Financial Analytics, there has been an increasing chance for significant financial instability as policymakers continually fail to curb risks outside the banking system despite the passage of regulatory reform legislation nearly four years ago.

The paper explains that regulation of the banking system and the “shadow” banking arena is increasingly imbalanced and thus poses a threat to the economy as risky activities shift to mostly unregulated institutions.

"The increasingly stringent rules applied almost exclusively to the very largest U.S. banks are combining with rapid market change to create a major risk to financial stability and even macroeconomic prosperity," writes Karen Shaw Petrou, co-founder and Managing Partner of Federal Financial Analytics, Inc. "This risk arises because like-kind activities are increasingly not regulated in like-kind fashion. Regulation largely follows form — that is, the charter a firm selects — not function — the services provided and the risks presented."

Petrou argues that policymakers must take steps to anticipate market realignment and recalibrate any actions to ensure that “like-kind activities are subject to like-kind activities are subject to like-kind rules” regardless of the institution. Federal Reserve Chair Janet Yellen has argued for tougher new rules as well, like the “enhanced supplementary leverage” requirement for top U.S. banks. This could force finance outside of the banking system.

Imposing new rules on the biggest banks and gradually designating nonbank systemically important financial institutions through the Financial Stability Oversight Council has been the focus for U.S. policy thus far.

"Because several large nonbanks were spark plugs to the 2008 Great Recession, policymakers have generally recognized that 'shadow' firms may pose profound risk," Petrou writes. "However, actions remain largely bank-centric, creating still stronger drivers of financial activity outside of the regulated-banking sector that is unlikely to be reversed when or if regulators finish designating systemic nonbanks or building out prudential standards for particularly important business lines."

Two recommendations were offered by Petrou in order to mitigate risk to shareholders and those to the broader market. She advises firms to adopt a forward-looking approach with regard to their regulatory analytics and avoid heavy-reliance on their rulebooks in order to comply with any finalized new rules. Petrou also suggests that regulators pause and reevaluate the work that has been completed thus far to define systemic risk on a firm-to-firm basis. They should also take closer look at the activities offered by these firms that may present risks to consumers, investors and financial stability.

"Policymakers must thus as a matter of urgency identify which activities pose the greatest risk, what rules mitigate them, and how the like-kind requirements can be applied across the spectrum of like-kind financial institutions," Petrou states. "Law often allows action now, especially in the U.S., so lack of authority is scant rationale for lack of definitive action."

 
 
FFIEC ENCOURAGES CYBERSECURITY PREPAREDNESS FOR FINANCIAL INSTITUTIONS
Last week, the Federal Financial Institutions Examination Council (FFIEC) announced that it will start conducting cybersecurity assessments and held a webinar to raise awareness about the prevalence of cyber threats. In a recent press release by the FFIEC, the organization stated that these assessments will help “make informed decisions about the state of cybersecurity across community institutions.”

The FFIEC also announced a vulnerability and risk-mitigation assessment as well as a regulatory self-assessment of supervisory policies and processes. These are planned for later on this year and will help FFIEC member agencies address any identified gaps and prioritize necessary actions to strengthen supervisory programs.

The key focus areas highlighted by the FFIEC include:

  • Setting the tone from the top and building a security culture;
  • Identifying, measuring, mitigating, and monitoring risks;
  • Developing risk management processes commensurate with the risks and complexity of the institutions;
  • Aligning cybersecurity strategy with business strategy and accounting for how risks will be managed both now and in the future;
  • Creating a governance process to ensure ongoing awareness and accountability; and
  • Ensuring timely reports to senior management that include meaningful information addressing institutional vulnerability to cyber risks.

Please see the presentation from last week’s FFIEC webinar for additional information.

 
 
FHFA WILL ENHANCE COORDINATION BETWEEN MORTGAGE INSURANCE OVERSIGHT UNITS, REJECTS MORE STRINGENT RECOMMENDATIONS
The Federal Housing Finance Agency (FHFA) responded to an audit from its Inspector General (IG) regarding oversight of the government sponsored enterprises (GSEs) by partially or fully rejecting the IG’s recommendations. The audit covers the oversight of the GSEs relationship with private mortgage insurers, and calls for the FHFA to develop a plan to “clearly define the policies and procedures used to achieve FHFA objectives concerning [GSE] use of mortgage insurance as a credit enhancement and risk management tool.”

The FHFA ordered a new master policy to address issues relating to the GSEs relationships with private mortgage insurance providers. As the FHFA and GSEs have not yet solidified a new approach, the IG audit states that “well-defined policies and procedure are particularly important as FHFA and the enterprises proceed with the implementation of new master policy agreements and eligibility requirements for mortgage insurers.” In response to this recommendation, the FHFA will continue to enhance coordination between mortgage insurance oversight units.

The IG also recommended that the FHFA approve all new mortgage insurers, rather than allow the GSEs to issue the approval. The FHFA rejected this recommendation, stating in its response to the IG audit that they believe the “responsibility to assess, manage and approve counterparties is the direct responsibility of the enterprises.” The audit also recommended that the FHFA develop a new approach for mortgage insurer review and document all findings from such reviews. The IG said that the FHFA is non-responsive to this recommendation as well; the FHFA stated that it is working with the GSEs to establish new approval standards for mortgage insurers.

 
 
CHINA COMMITS TO CAPITAL MARKET REFORMS
China’s cabinet, the State Council, vowed to press forward with a broad range of reforms to the country’s capital markets during a comprehensive statement of policy principles last Friday. These reforms are aimed at promoting a fair and open market, encouraging more efficient capital allocation and increasing openness to foreign investment.

The State Council also pledged to develop a system for direct bond issuance by local governments, push ahead with reforms to streamline the approval process for equity initial public offerings and eliminate restrictions on the use of financial derivatives. Policy principles and reforms have been mentioned previously by the Chinese government, but Friday’s statement indicates a renewed commitment to capital-market policy reform.

 
 
IRS PROPOSED REIT RULE ALTERS DEFINITION OF “REAL PROPERTY,” OFFERS CHANGES FOR SOLAR SECTOR
On May 9th, the Internal Revenue Service (IRS) released a notice of proposed rulemaking (NPR) regarding the definitions of “real property” as it relates to Real Estate Investment Trusts (REITs). Specifically, the NPR would alter the definition of “real property” by providing a framework to analyze the types of assets in which REITs may invest. Specifically, the proposal includes thirteen examples separated into three categories, including:
  1. Definition of land;
  2. Definition of improvement to land; and
  3. Treatment of intangible assets.

For the solar sector, the NPR distinguishes between utility-scale solar photovoltaic (PV) sites and solar-powered buildings. Furthermore, the NPR assesses solar energy sides on three components: (a) PV modules (b) mounts and (c) exit wires. For solar-powered buildings, the proposal may allow for solar sites adjacent to REIT-owned office buildings to meet the definition of “real property,” so long as they meet a number of provisions and serve a “utility-like function” for the associated building.

The NPR will be open for public comment for 90 days after the proposal is published in the Federal Register. Once the comment period is closed, the IRS will hold a public hearing to discuss the NPR on September 18, 2014.

 
 
HUD HOUSING SCORECARD SHOWS POSITIVE TRENDS
The most recent housing scorecard released by the Department of Housing and Urban Development (HUD) and Department of the Treasury demonstrates small gains in the housing market while affirming that the economic recovery is far from over. HUD’s Assistant Secretary for Policy Development and Research, Katherine O’Regan, said that “April’s Housing Scorecard shows that the housing market is stabilizing, as home prices have risen 7 percent from last year, and foreclosure completions are at their lowest level since mid-2007.” Despite general improvements in the housing market, the Scorecard indicates that new home sales were down 13.3 percent from March 2013.
 
 
THE FEDERAL RESERVE ISSUES PROPOSAL ON FURTHER CONCENTRATION LIMITS FOR LARGE FINANCIAL COMPANIES
On May 8th, the Federal Reserve Board (Fed) invited comment on a proposed rulemaking that would implement section 622 of the Dodd-Frank Act, which prohibits a financial company from combining with another company if the ratio of the resulting financial company's liabilities exceeds 10 percent of the aggregate consolidated liabilities of all financial companies. Financial companies subject to the concentration limit would include insured depository institutions, bank holding companies, savings and loan holding companies, foreign banking organizations, companies that control insured depository institutions, and nonbank financial companies designated by the Financial Stability Oversight Council (FSOC) for Fed supervision.

Consistent with section 622, the proposal generally defines liabilities of a financial institution as the difference between its risk-weighted assets, as adjusted to reflect exposures deducted from regulatory capital, and its total regulatory capital. Firms not subject to consolidated risk-based capital rules would measure liabilities using generally accepted accounting standards. The proposal would also provide that the Fed would measure and disclose the aggregate liabilities of financial companies annually, and would calculate aggregate liabilities as a two-year average. The proposal reflects recommendations made by the FSOC.

Comments on the proposal should be submitted by July 8, 2014.
 
 
UPCOMING EVENTS IN WASHINGTON
JOHNSON-CRAPO HOUSING FINANCE REFORM BILL MARKUP
THURSDAY, May 15, 2014
10:00 a.m. (EST)
Senate Committee on Banking, Housing, and Urban Affairs Committee
534 Dirksen Senate Office Building
A webcast of the markup will be available on the Senate Committee on Banking, Housing and Urban Affairs Committee website.
 

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

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


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