May 20, 2015 Newsletter
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May 20, 2015


SFIG Calendar

Advocacy Outlook

Industry News Highlights

Upcoming Events in Washington


This week, SFIG staff met with Congressman Scott Garrett (R-NJ), as well as staff members of the House Committee on Financial Services, to discuss European regulatory efforts to create a high-quality securitization (“HQS”) framework and the potential effect on the U.S. asset-backed securities marketplace. On May 13th, SFIG submitted comments to the European Commission in response to its consultation on an EU framework for simple, transparent and standardized securitization. SFIG has also commented on several other documents regarding high quality securitization in recent months, which can be seen here.

Contact to learn more about Congressional outreach efforts. Contact to join SFIG’s HQS Task Force.


SFIG is pleased to welcome our summer intern, Elizabeth Harris. Elizabeth will engage on a wide range of advocacy initiatives at SFIG, and will help with the development of SFIG’s digital communications programs. She currently attends Villanova University where she is majoring in Communications, with an expected minor in Business. Elizabeth is from the Washington, DC area and enjoys historical trivia and supporting Villanova basketball. 


SFIG would like to remind our readers that we currently have several open staff positions. We are seeking talent to fill three open positions:

  1. Director of Mortgage Policy: Responsible for the development and execution of a robust mortgage securitization policy program, including SFIG's RMBS 3.0 and GSE reform initiatives.
  2. Manager of ABS Policy: Provides policy formation support, and at times solely manages activities, across a wide range of proposed regulation and legislation impacting all asset types covered by SFIG's committees.
  3. Media Manager: Manages and develops strategy across all areas of SFIG communication, including website, newsletters, and social media.

For additional information, please contact, or visit our jobs page.

THURSDAY, May 21, 2015
10:00 a.m. – 11:00 a.m. (ET)
THURSDAY, May 21, 2015
3:00 p.m. – 4:00 p.m. (ET)
TUESDAY, May 26, 2015
11:00 a.m. – 12:00 p.m. (ET)
WEDNESDAY, May 27, 2015
1:00 p.m. – 2:00 p.m. (ET)
THURSDAY, May 28, 2015
10:00 a.m. – 11:00 a.m. (ET)
TUESDAY, June 16, 2015 – THURSDAY, June 18, 2015
The Barcelona International Convention Centre
Barcelona, Spain
Registration is available here.

WEDNESDAY, June 24, 2015
12:00 p.m. - 5:00 p.m. (ET)
Deloitte & Touche LLP
30 Rockefeller Plaza
New York, NY 10112

Note: Closed Meeting

WEDNESDAY, September 16, 2015 – FRIDAY, September 18, 2015
The Fontainebleau
Miami Beach, FL
Registration is available here.



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 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

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 discussions with a focus on 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

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 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

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

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

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


Yesterday, Senator Sherrod Brown (D-OH), Ranking Member of the Senate Committee on Banking, Housing, and Urban Affairs (“Committee”) proposed the Financial Regulatory Improvement Act of 2015, a targeted regulatory relief bill focused on community banks and credit unions. The 17-page bill presents an alternative to Committee Chairman Richard Shelby’s (R-AL) bill that attempts to provide broader regulatory relief for similar institutions. Mr. Brown’s bill, backed by all 10 democrats on the committee, focuses on the following areas important to securitization:

  1. Section 101: Qualified mortgage liability protection for certain loans, as long as they are held in portfolio by depository institutions under $10 billion in total consolidated assets, and exclude no-doc loans or loans with excessive fees or interest rates (p. 2).
  2. Section 104: Allow privately-insured credit unions to join the Federal Home Loan Bank System (p. 8).
  3. Section 202: Permanent extension of the Protecting Tenants at Foreclosure Act that expired in 2014. The provision would require a landlord to provide a 90-day notice to the tenant to vacate the property (p. 16).
  4. Section 203: Allow federal and state financial services regulators access to the Nationwide Mortgage Licensing System database while maintaining confidentiality of information shared between regulators (p. 17).

Mr. Brown’s bill, available here, will likely be offered as an amendment to Mr. Shelby’s bill during the markup to be held tomorrow. A section-by-section analysis of Mr. Brown’s bill is available here.


Last Friday, May 15th, the Federal Housing Finance Agency ("FHFA") released an update on the structure of the Single Security that Fannie Mae and Freddie Mac (“GSEs”) could issue to finance fixed-rate mortgage loans backed by single family units. The development of a Single Security is part of its broader efforts to build a common securitization platform and ensure broad liquidity in the U.S. housing finance markets.

The FHFA published a Request for Input on its proposed Single Security structure in August 2014. Last week’s update reflects FHFA’s determinations based on comments received from 23 response letters (see here for SFIG’s comment letter). According to the FHFA, it has made the following determinations about the Single Security structure:

  1. Security Issuer and Guarantee Structure: The GSEs will issue and guarantee Single Securities backed by loans they acquire; the GSEs will not cross-guarantee these securities and the Federal Home Loan Banks will not be an eligible issuer.
  2. Common Features: The Single Security will retain the features of the current Fannie Mae MBS, including payment delay of 55 days.
  3. Loan Products in Scope: The securities will finance fixed rate mortgage loans eligible for financing through the TBA market.
  4. Multiple-Lender Pools: Lenders will still be able to contribute loans to multi-lender pools.
  5. Re-securitizations: the GSEs will be able to issue re-securitizations, though for Freddie Mac this will require the investor to exchange the participation certification (“PC”) for a Single Security issued first by Freddie Mac.
  6. Disclosures: The loan and security level disclosures will resemble those of Freddie Mac PCs.
  7. Alignment of Programs, Policies and Practices: Policies and practices related to buyouts will be generally similar and aligned for purposes of the Single Security.
  8. Legacy Fannie Mae MBS and Freddie Mac PCs: Investors will be given the option to exchange legacy PCs for Single Securities backed by the same loans and be compensated by Freddie Mac for the cost of the change in the payment delay; Fannie Mae legacy MBS will not receive an exchange option as FHFA expects investors to treat these as fungible with Single Securities.

FHFA has invited comment on the determinations announced in this update and will continue engaging industry stakeholders as the Single Security structure is refined and an implementation schedule is developed. SFIG is reviewing the FHFA update through its GSE Reform task force. To join the GSE Reform task force please contact


While European policy makers look for ways to stimulate capital markets, the securitization of peer-to-business (“P2B”) lending is expected to provide a boost to the development of funding alternatives for European small and medium-sized enterprises (“SMEs”), according to a report in Moody’s.

“The development of non-bank funding alternatives such as peer-to-business and securitization can play an important part in facilitating capital flows to a broader range of European corporate borrowers,” said Igor Zelezetskii of Moody’s Investors Service. In the UK, businesses have obtained approximately $2.2 billion through P2B lending.

However, in order for P2B companies to attract investors and increase lending operations, a number of factors will be necessary, including a customized regulatory environment and incentives for market players to maintain adequate origination standards.


As peer-to-peer lending (“P2P”) becomes one of the fastest-growing asset classes in structured finance, some analysts are raising concerns that uncontrolled growth could lead to another bubble, according to an article in BloombergBusiness. While P2P loans represent only 0.08 percent of the $96 trillion in outstanding global corporate and household debt, P2P loan volume is expected to reach new heights of $77 billion this year. The spike in growth is being driven by increased institutional investment and the securitization of consumer loans. “But as institutions pour money into P2P, some platforms may relax their credit criteria and welcome riskier borrowers to accommodate the flow, especially if they can offload risk through securitizations,” said Michael Tarkan of Compass Point Research & Trading.

The securitization of consumer loans has allowed for P2P platforms to spread risk and increase loan volume. To assure investors in the quality and performance of their debt, P2P firms are publishing loan data online. “We publish data on every loan. So any signals that bad debt had started rising would be very visible,” said Giles Andrew of Zopa. Many P2P lenders also insist that the industry has strict standards to keep default rates low. 


Yesterday, the Financial Stability Oversight Council (“FSOC”) issued its annual report, which notes progress toward financial reforms, including the adoption of a credit risk-retention requirement for ABS, stronger capital, leverage, and liquidity standards, and credit rating agency reforms. The report also discusses peer-to-peer (“P2P”)/marketplace lending and nonbank mortgage services in a section which highlights potential emerging threats and vulnerabilities. The report states, “in addition to credit risk, P2P lenders are also subject to liquidity risk because there is no secondary market for these loans” and “the migration in credit origination outside of the banking system could result in a further decline in underwriting standards for those particular loans, which could result in larger losses in stressed conditions.” 

FSOC also noted that while Fannie Mae and Freddie Mac have continued to reduce their exposure to mortgage credit risk, taxpayer risk could be reduced by increased private mortgage market activity. The report states, “The Council therefore recommends that [the Federal Housing Finance Agency], Treasury, and [Department Housing and Urban Development] work with market participants to more clearly define and standardize representations and warranties.” In an effort to increase transparency throughout the financial system, FSOC also recommended that best practices for data sharing and improved reporting efficiency should be explored to reduce the reporting burden on the industry. 


Commodity Futures Trading Commission (“CFTC”) Chairman Timothy Massad told lawmakers last week that his agency has made progress harmonizing its rules on margin requirements for uncleared swaps with those in Europe but their respective final rules will not be identical. During his testimony before the Senate Agriculture Committee on May 14th, Massad advocated passionately for what he called the United States’ “superior” rules, stating that compared to the E.U., “We actually have a much better system in our minds. I believe our methodology and systems overall for risk mitigation are the gold standard in the world. I think we have made some progress in educating them about those issues.”

The CFTC has stated it plans to finalize the margin requirements for uncleared swaps rulemaking this summer, and while its rules and those of the prudential regulators are expected to be substantially similar, the differences among the rules from the U.S., E.U. and other jurisdictions raise a number of cross-border issues. This has led to a number of meetings in Brussels to harmonize the rules. Regarding his latest meeting with E.U. regulators, Massad told members of the Agriculture Committee, “I was pleased we were making progress. I think there is a lack of information, a lack of understanding in these areas. Their assumption that differences in our two systems somehow meant that ours was riskier was dead wrong and in fact if anything I think ours is superior but the issue is just getting to equivalence.” 


China will be expanding its asset securitization pilot program according to a statement released after a State Council executive meeting on May 13th. The State Council stated that credit asset securitizations worth 500 billion yuan ($81.18 billion) are in the pipeline.

China restarted its pilot program in 2012 and has seen rapid growth ever since, as government encouragement and policy support have streamlined operations, according to a recent Xinhua article. As a result, China's securitization boomed last year with issuance amounting to more than 300 billion yuan ($48.3 billion), more than double the combined total of the previous years.

"With the experience accumulated from the pilot program, the government's move for expansion will let securitization play a bigger role in activating assets and improve resource redistribution," said Ji Zhihong, head of the financial market arm of the People's Bank of China.


Today, May 20th, the Federal Housing Finance Agency (“FHFA”) announced final capital requirements for mortgage servicers and lenders that do business with the government sponsored enterprises (“GSEs”) Fannie Mae and Freddie Mac. As stated in FHFA’s press release, the finalized requirements do not substantially differ from those proposed by FHFA in January. Under the final rule, these firms will be required to meet a minimum net worth threshold of $2.5 million plus 25 basis points of the total dollar amount in loans serviced. Companies involved in the transfer of servicing business will also have to meet the standards; nondepository servicers will have to meet additional capital and liquidity requirements.

The requirements will go into effect on December 31, but the GSEs may grant exceptions or extend the transition period for any firm not in compliance. Large nonbanking companies are already expected to be meeting the standards. FHFA will monitor servicers on a quarterly basis to ensure they meet the requirements. In conjunction with the release of the final capital requirements, FHFA published updated guidelines for the GSEs regarding how their servicers handle payments and foreclosures. These go into effect on September 1st.


In the years following the mortgage crisis, RMBS investors have increasingly turned their attention to monitoring servicer performance, according to a release from Fitch Ratings discussed in an article in National Mortgage News. As nonbank servicing has grown to comprise a larger portion of servicer activity, RMBS participants are placing greater importance on alignment of interest in servicing and servicing oversight, including allowing increased access to servicers, servicer reassignment under certain circumstances, and consideration of a transaction manager role in future deals. According to the article, “Fitch believes that certain of these changes could be implemented directly by servicers themselves. Additionally, some cases might warrant the use of a transaction manager or like entity for oversight purposes.”  


European securitization industry participants cast doubt on new European regulatory recommendations, according to an article in the Financial Times. In spite of previous measures taken to revive issuance, the market for European ABS has remained weak. Last week, European regulators announced several new recommendations to address due diligence and disclosure requirements for structured finance instruments. The new recommendations “will contribute to restoring investor confidence in this sector while increasing its efficiency” said Steven Maijoor, chair of the European Securities and Markets Authority. Europe’s securitization industry has responded with frustration, arguing that the regulations will send a “negative signal to the market.”


Treasury yields continue to climb higher, as U.S. government debt holdings by banks have declined in the first quarter by $2.6 billion, according to an article in CNBC. While Treasurys are being unloaded, banks increased their holdings in

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