November 13, 2013 Newsletter
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November 13, 2013


Issue Spotlight

Recent Developments



ABS Vegas momentum continues to be incredibly strong, with 115 sponsors to date and a host more in process. We already have approaching 2,000 participants registered, over half of which are investors and issuers. Rooms at the Cosmo are already sold out, with the overflow block of space at the Aria also selling fast. Don’t miss the chance to be part of the Structured Finance Industry’s largest conference. Click here to register for ABS Vegas 2014.

As we finalize the conference agenda, we are inviting speaker nominations, with the closing date for nominations being November 22, 2013. Please note that priority consideration will be given to current SFIG members. A member may self-nominate, or submit on behalf of a non-member.

Click here for the ABS Vegas 2014 Speaker Nomination Form. Click here for the conference Agenda.




Indications are that the five federal agencies (Joint Regulators) responsible for promulgating the rules required to implement Section 619 of the Dodd-Frank Act (Section 619), “Prohibitions and Restrictions on Proprietary Trading and Certain Interests in and Relationships With Hedge Funds and Private Equity Funds” (Volcker Rule) will take further action with respect to that provision in December of 2013.

Although not a securitization-specific provision per se, Section 619, when fully implemented, is expected to have a major impact on the securitization industry. A key focus of the Volcker Rule is its restriction on “proprietary trading” activities of banks. However, the Volcker Rule also includes significant restrictions on bank activities with “covered funds.” Although covered funds are intended to include hedge funds and private equity funds (which can be a proxy for a bank’s direct proprietary trading), the broad scope of the term “covered fund” as used in the proposed Volcker Rule means that whatever guidance emerges from the rule-making process is likely to have a substantial impact on securitizations generally.

In addition, the Volcker Rule rule-making will set the stage for the rule-making under Section 621 of the Dodd-Frank Act (Section 621), “Conflicts of Interest.” Section 621 adds a new section, Section 27B, to the Securities Act of 1933, entitled “Conflicts of Interest Relating to Certain Securitizations.” Section 621 is a securitization-specific provision of the Dodd-Frank Act and addresses a number of the issues raised in Section 619, including the definitions of permissible hedging activities and market-making. Section 621 applies to securitization activities undertaken by any entity, not just banks. The staff of the Securities and Exchange Commission (SEC), one of the five agencies charged with the Volcker Rule implementation, has indicated that, for consistency purposes, the SEC will not take up Section 621 rule-making until further action has been taken with respect to the Volcker Rule.

The current status of the Volcker Rule is that four of the five agencies involved – the SEC, the Board of Governors of the Federal Reserve System (Federal Reserve), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) released a proposed version of the Volcker Rule (Proposed Volcker Rule) on October 11, 2011, with the Commodities Futures Trading Commission (CFTC) following on January 11, 2012. The Proposed Volcker Rule ran to almost 300 pages, and largely consisted of a set of questions designed to elicit the views of the public at large and the financial services industry in particular. Approximately 17,000 comment letters have been submitted in response.

SFIG Prepares to Respond

Given the complexity of the issues, the potential magnitude of the effect on the securitization industry of the Volcker Rule and its expected impact on the Section 621 securitization conflicts of interest rule, SFIG’s leadership has determined to begin now to prepare for what is likely to be a major effort to facilitate a coordinated and efficient implementation process in the industry of the expected final rule. Since two years have passed since the Proposed Volcker Rule was released, SFIG will hold a conference call open to all of its members in early December to re-acquaint the membership with the issues at stake for the securitization industry in this major rule-making process.


Named for former Federal Reserve Chairman Paul Volcker, the Volcker Rule is one of the centerpiece provisions of the Dodd-Frank Act. Section 619 adds a new provision, Section 13, to the Bank Holding Company Act of 1956, that provides that a “banking entity shall not … engage in proprietary trading or … acquire or retain any equity, partnership, or other ownership interest in or sponsor a hedge fund or a private equity fund.” Section 619 defines:

  • “proprietary trading” to mean:

engaging as a principal for the trading account of the banking entity or nonbank financial company … in any transaction to purchase or sell, or otherwise acquire or dispose of, any security, any derivative, any contract of sale of a commodity for future delivery, any option or any security, derivative or contract, or any other security or financial instrument that [the Joint Regulators may specify].

  • “hedge fund” and “private equity fund” to mean “an issuer that would be an investment company, as defined in the Investment Company Act of 1940, but for Section 3(c)(1) or 3(c)(7) of that Act, or such similar funds” as the Joint Regulators may specify.

In addition, Section 619 provides that no transactions or activities will be permitted activities under the Volcker Rule if such transactions or activities:

  • would involve or result in a material conflict of interest … between the banking entity and its clients, customers or counterparties;
  • would result, directly or indirectly in a material exposure by the banking entity to high-risk assets or high-risk trading strategies;
  • would pose a threat to the safety and soundness of such banking entity; or
  • would pose a threat to the financial stability of the Unites States.

Section 619 would further restrict banking entities that serve, directly or indirectly, as an “investment manager, investment adviser, or sponsor” of a hedge fund or private equity fund from engaging in a transaction with that fund that would be a “covered transaction” within the meaning of Section 23A of the Federal Reserve Act. Under Section 23A of the Federal Reserve Act, a “covered transaction” includes:

  • a loan or extension of credit, including a purchase of assets subject to an agreement to repurchase;
  • a purchase of securities;
  • the acceptance of securities as collateral for a loan;
  • the issuance of a guarantee or a letter of credit;
  • the borrowing or lending of securities; and
  • a derivative transaction.

However, Section 619 contains an exemption for securitization, stating “[n]othing in this section shall be construed to limit or restrict the ability of a banking entity or nonbank financial company … to sell or securitize loans in a manner otherwise permitted by law.”

Impact on Securitizations

Many securitization transactions rely on the two exemptions from the Investment Company Act that the Volcker Rule employs to define hedge fund and private equity fund, Section 3(c)(1) and Section 3(c)(7). Section 3(c)(1) is the “private investment company” exemption (fewer than 100 investors) and Section 3(c)(7) is the exemption for funds in which all investors are “qualified purchasers.”

Thus, notwithstanding the broad securitization exemption provided by the text of Section 619 itself, the Volcker Rule would nevertheless apply to securitizations that rely on these two Investment Company Act exemptions.

Consistent with Section 619’s broad exemption for securitization, the Proposed Volcker Rule would allow a bank to sponsor or own interests in covered funds that invest solely in “loans” (defined to include loans, leases, receivables and certain other extensions of credit).

The Proposed Volcker Rule also provides that a bank that sponsors any securitization vehicle (which may or may not be backed by “loans”) may retain an interest in that vehicle in an amount not greater than would be required under the risk retention rules of Section 15G of the Securities and Exchange Act of 1934. The implication is that any greater investment in a securitization vehicle – even if required by rating agencies, investors or the European Union’s Capital Requirements Directive Article 122(a) – would be prohibited.

A number of industry commenters have pointed out several shortcomings in the method that the Proposed Volcker Rule attempted to implement the securitization exemption included in Section 619 itself. Most notably, even if a securitization vehicle that is a “covered fund” has assets restricted to “loans,” the Proposed Volcker Rule merely permits a banking entity to own interests in or sponsor such vehicle. It does not permit a bank that acts as sponsor, investment manager or investment advisor to such covered fund to engage in any “covered transactions” with such vehicle. As a result, any financial support from such a sponsor, manager or advisor would be prohibited, even if provided to an “exempted” loan securitization vehicle. Particular concerns have also been raised with respect to asset-backed commercial paper (ABCP) conduits sponsored by banks or by bank affiliates. Although the Proposed Volcker Rule would appear to allow banks to sponsor ABCP conduits that invest in “loans,” many of the related activities necessary for the operation of such an ABCP conduit, such as providing liquidity or credit support, may be prohibited as constituting a “covered transaction.”

Similar “covered transaction” concerns may arise in connection with “tender option bond” support facilities provided by banks in connection with municipal bond offerings.

Also, industry participants noted that many securitizations include intermediate SPVs that have no available exemptions from the 40 Act other than 3(c)(1). As intermediate SPVs, these entities don’t qualify for the loan securitization vehicle exemption because they don’t own loans; rather they own equity in an issuer that owns loans.

In addition to the impact the Volcker Rule may have on particular securitization transactions, the final provisions of the rule will also influence a number of provisions of the securitization-specific Section 621 conflicts of interest rule. That rule, like the Volcker Rule, makes use of the terms “risk-mitigating hedging activities,” “market making” and “material conflict of interest.” It is almost certainly the case that the manner in which the Joint Regulators define the scope of those terms with respect to the Volcker Rule will serve as precedent for the meaning of those terms in the securitization conflicts of interest rule.

Recent Developments

At least two, Michael Piwowar and Dan Gallagher, of the five SEC Commissioners have stated publicly that they believe the Volcker Rule regulation should be re-proposed, rather than have the Joint Regulators release a final rule. That view was echoed in a comment letter submitted on November 7, 2013 by the U.S. Chamber of Commerce, the nation’s largest trade association. The Chamber of Commerce letter also stated that the Proposed Volcker Rule suffered from a deficient cost-benefit analysis, and that the public has not yet been able to comment on a “meaningful” analysis of the proposal.

Bloomberg reported that U.S. Treasury Secretary Jacob Lew has warned bankers in recent private meetings that the final Volcker Rule ban on proprietary trading may well be tougher than they expect. Currently, the effective date for compliance with the Volcker Rule is July 21, 2014. It is expected that the deadline will be extended. Under the Dodd-Frank Act, the Federal Reserve has the authority to grant up to three one-year extensions for banks requesting a delay or to extend application more broadly by rule.

If you are interested in participating in SFIG’s advocacy efforts with respect to the Volcker Rule, please contact SFIG at or

Click here for Section 619 of the Dodd-Frank Act. Click here for the Proposed Volcker Rule.


On November 7, 2013, the Board of Governors of the Federal Reserve (Federal Reserve) issued a final policy statement (Policy Statement) describing the processes it will use to develop scenarios for future capital planning and stress testing exercises.

The Policy Statement will be used to develop scenarios for both annual supervisory and company-run stress tests. It describes the characteristics of the stress test scenarios and explains the procedures for formulating the scenarios. Although the Policy Statement is not effective until January 1, 2014, the macroeconomic scenarios previously released by the Federal Reserve for the 2014 stress testing exercise are consistent with the policy statement.

Also on November 7, 2013, the Federal Reserve issued revised macroeconomic scenarios for the 2014 capital planning and stress testing program to correct a minor computational error for the projections of the five-year Treasury yield in the baseline and adverse scenarios. The severely adverse scenario was unchanged.

Click here for the Policy Statement.


On November 6, 2013, U.S. District Court Judge Charles Breyer issued an order (Order) in the Bank of New York Mellon v. City of Richmond, California and Mortgage Resolutions Partners LLC case. The plaintiff in the case seeks to block Richmond from using its eminent domain authority to seize and restructure underwater mortgage loans. The order grants Richmond’s Motion to Dismiss without prejudice, saying that the case is “not prudentially ripe for consideration.” Judge Breyer dismissed a similar motion on September 17, 2013 in the Wells Fargo Bank, National Association, as Trustee, et. al. v. City of Richmond, California and Mortgage Resolution Partners LLC case, stating that the suit was also "not yet ripe."

Click here for the Order.


On November 6, 2013, U.S. Department of the Treasury (Treasury) stated its intention on Thursday, January 23, 2014, to release the details of its initial Floating Rate Note (FRN) auction. The first auction is scheduled to occur on January 29, 2014. Settlement of the security will occur on January 31, 2014.

The FRN is the first new product that Treasury has brought to market in seventeen years. The FRN will have a maturity of two years and Treasury anticipates that the size of the first auction will be between $10 and $15 billion.

Specific terms and conditions of each FRN issue, including the auction date, issue date, and public offering amount, will be announced prior to each auction.

Click here for more details about the new Treasury FRN product, including a term sheet, FRN auction rules, and frequently asked questions. Click here for a tentative auction calendar that includes Treasury FRNs.


On November 6, 2013, the Consumer Financial Protection Bureau (CFPB) took the first step toward rulemaking for the debt collection market. Through its Advance Notice of Proposed Rulemaking (ANPR), the CFPB is collecting information on a wide array of issues, including the accuracy of information used by debt collectors, how to ensure consumers know their rights, and the communication tactics collectors employ to recover debts. Comments are due 90 days from when the ANPR is published in the Federal Register.

The main law that governs the debt collection industry and protects consumers is the 1977 Fair Debt Collection Practices Act (FDCPA). In 2010, the Dodd-Frank Act revised the FDCPA, making the CFPB the first agency with the power to issue substantive rules under the statute.

The ANPR addresses the accuracy of information transferred from an original creditor to third-party debt collection firms and debt buyers, and from those parties to other debt collectors and credit bureaus. Regarding such transfer of information, among the questions the ANPR raises are how federal rules could better ensure that debt collectors correctly record and transmit the following items:

  • Correct person: The CFPB is concerned that debt collectors may try to collect money for debts from the wrong consumers. The ANPR asks for feedback on how debt collectors identify account holders, how they make sure they are pursuing the correct person, what means they use to verify someone’s identity, and how they respond when a consumer says they have the wrong person.
  • Correct amount: The CFPB is concerned that debt collectors may try to collect more than what the consumer owes on a debt. The CFPB is interested in knowing more about how debt collectors ensure they are seeking to recoup accurate sums.
  • Correct documentation: The CFPB is concerned that debt collectors do not always have adequate or accurate paperwork or data to support their claims about a consumer’s indebtedness. The ANPR asks for feedback on what documents get sold with a debt, what documents consumers should have access to, and what documents collectors should be required to provide to a consumer.

The ANPR also addresses the concern that the disclosures and information that are currently provided to consumers may be confusing or incomplete. Regarding this concern, among the questions the ANPR raises is whether federal rules can better ensure that consumers receive the following items:

  • Clear information about the debts: The CFPB is concerned that debt collectors may try to collect money for debts that consumers do not recognize or understand. The ANPR asks for feedback on the quality of the information consumers receive regarding the debt that is being collected and whether new rules could improve those disclosures.
  • Adequate information about legal rights: The FDCPA provides consumers with a set of rights, including the right to dispute a debt or to limit certain types of communications from collectors. The ANPR seeks feedback on how legal rights are being disclosed to consumers and whether new rules could improve those disclosures.

In the ANPR, the CFPB is asking for feedback on whether harmful communication tactics are happening that are not specifically addressed in the FDCPA. Among the issues the ANPR raises is how federal rules can better regulate the following:

  • Contact frequency: The CFPB is concerned about some debt collectors continuously calling consumers. The ANPR asks for feedback on whether new federal rules should limit debt collector contact, and, if so, how to do so appropriately.
  • Contact methods: When Congress passed the FDCPA in 1977, the means of reaching a consumer were limited. Today, debt collectors can communicate with consumers by using email, smartphones, fax machines, and social media. The ANPR seeks feedback on the potential harms or benefits from a debt collector using these modern technologies.
  • Contact claims: The CFPB is concerned about some debt collectors falsely threatening to initiate a lawsuit or criminal prosecution, garnish wages, damage or ruin a consumer’s credit rating, seize property, get the consumer fired from their job, or have a consumer jailed. The ANPR seeks feedback on the prevalence of such false threats and their impact on consumers.

Click here for the ANPR.



On November 5, 2013, the Commodity Futures Trading Commission (CFTC) approved two position limits proposals (Proposed Regulations) at an open meeting. The first proposal on position limits for derivatives was approved with a 3-1 vote, and the second proposal approved the proposed regulations for aggregation of accounts under Part 150 of CFTC regulations with a unanimous vote. The Proposed Regulations call for the CFTC to administer limits on speculative positions in 28 core physical commodity contracts and their futures, options, and swaps, as well as to establish speculative limits on references contracts, which will be effective sixty days after publication of a final rule.

Click here for the CFTC’s fact sheet on the Proposed Regulations.


On November 5, 2013, one hundred and eighteen members of the U.S. House of Representatives (House) (over 25% of the House) petitioned Director Richard Cordray and the Consumer Financial Protection Bureau (CFPB) via a letter (House Letter) to delay the impending qualified mortgage (QM) and Ability to Repay rules by one year. Many trade groups have also petitioned the CFPB regarding QM and its effects on the housing market.

The House Letter indicates that House members are genuinely concerned over the implications posed by QM on community financial institutions that “may only have one or two compliance officers.” The House Letter also highlights that there is a substantial concern over the ability of these small community financial institutions to be able to get their guidelines and systems up to date by the QM rule’s effective date in January of 2014.

The House Letter reads: “[m]any financial institutions rely on software systems for managing their operations. We have heard concerns from many community financial institutions that they simply will not be able to meet the January 2014 deadline to have their systems online and in place,” The House Letter notes: “f financial institutions are unable to comply with these rules by the January 2014 deadline there could be significant distortions in the mortgage market affecting the availability of credit for consumers.”

Click here for the House Letter.


On November 5, 2013, at an open meeting of the Commodity Futures Trading Commission (CFTC), CFTC Commissioner Bart Chilton announced his intention to leave the CFTC “in the near future.” In his statement, Commissioner Chilton said that he had been waiting for the CFTC to propose a rule curbing the size of positions in speculative commodity trading, which the CFTC passed at the meeting on November 5, 2013.

After Mr. Chilton’s resignation, the CFTC will have three Commissioners (two Democrats and one Republican) remaining. In addition, CFTC Chairman Gary Gensler’s term expires at the end of 2013, and he is also expected to step down by the end of the year. President Obama announced on November 12, 2013 that he will nominate Timothy Massad, U.S. Department of Treasury Assistant Secretary for Financial Stability as the successor to Chairman Gensler.

The press has reported that Sharon Bowen, current Acting Chair of the Board of Directors of the Securities Investor Protection Corporation (SIPC) and a partner at Latham & Watkins, is being considered as a possible nominee for Commissioner Chilton’s seat. In addition, on August 1, 2013, President Obama nominated J. Christopher Giancarlo to fill the Republican Commissioner seat left vacant by the departure of Commissioner Jill Sommers. Mr. Giancarlo’s nomination has not yet been considered by the Senate.

Click here for Commissioner Chilton’s statement announcing his resignation.


On November 5, 2013, Freddie Mac priced a $630 million offering of its Structured Agency Credit Risk (STACR®) debt notes, Series 2013 DN2. This offering represents Freddie Mac's second STACR® offering in which private sources, and not taxpayers, predominately take the credit risk. The first STACR offering, Series 2013 DN1, settled in July.

About 50 broadly-diversified investors participated in the offering. Pricing for the STACR® Series 2013 DN2 senior debt notes, the M-1 class, was one-month LIBOR plus a spread of 145 basis points. Pricing for the M-2 class was one month LIBOR plus a spread of 425 basis points. The offering was oversubscribed and is scheduled to settle on November 12, 2013.

The senior STACR® Series 2013-DN2, M-1 class received investment grade ratings of Baa1 by Moody's and BBB-(sf) by Fitch, subject to ongoing monitoring. The M-2 class is not rated. Both classes have an exchangeable feature giving investors the option to either combine pro-rata portions of the cash flows from the M-1 and M-2 classes or to strip off a portion of the interest from either class to create bonds with different margins.

For STACR® Series 2013-DN2, the amount of periodic principal and ultimate principal paid by Freddie Mac is determined by the performance of a diversified reference pool of more than 145,500 residential loans, representing an unpaid principal balance of approximately $35.3 billion. This pool consists of a subset of 30-year fixed-rate single-family mortgages acquired by Freddie Mac in the first quarter of 2013. Freddie Mac holds the senior risk and the first loss risk in the reference pool, and a portion of the risk in the M-1 and M-2 classes.

STACR® Debt Notes, Series 2013-DN2 were offered to the market by Barclays Capital as co-lead manager and sole bookrunner. Morgan Stanley also served as co-lead manager. Nomura, RBS and Wells Fargo served as co-managers.

Click here for the Offering Circular for the STACR® Series 2013-DN2 Debt Notes.


On November 5, 2013, Experian and Moody’s Analytics released the latest version of the Small Business Credit Index Report (Report), indicating that small-business credit quality continued to show significant improvement in the 3rd quarter of 2013. The Report maintains that a rise in outstanding credit balances and a decrease in credit delinquency rates for small-businesses directly contributed to the trend. The Index is now at a record high of 118.5 marking the third consecutive quarter of improvement.

The data in the Report shows definite, sustained improvement of outstanding loan balances and loan payment trends that bode well for the stronger recovery for which the sector has been waiting. The Report also contains troubling data as well. Specifically, the government shutdown, which lasted nearly three weeks, prevented the U.S. Small Business Administration (SBA) from lending money in October of 2013, resulting in a 35% decrease of SBA’s loan volume from the same period last year. Although the SBA seems poised to make up for the lost ground by the end of the year, there are concerns about the potential impact of another government shutdown, which may come as early as January of 2014. Moreover, the Report shows continuing regional differences among small businesses, with those in the Atlantic Seaboard still struggling with higher delinquencies than their western counterparts.

Click here for the Report.


On November 5, 2013, the Financial Stability Board (FSB) launched the second stage of its two-stage quantitative impact study (QIS) on the proposed regulatory framework for securities financing transactions. On August 29, 2013, the FSB published a report entitled “Policy Framework for Addressing Shadow Banking Risks in Securities Lending and Repos” (Policy Framework) that set out policy recommendations for addressing financial stability risks in relation to securities lending and repos. These measures formed part of an overall set of policy recommendations to strengthen oversight and regulation of shadow banking, an overview of which (Overview of Policy Recommendations) was published on the same date.

The FSB launched a two-stage QIS in April of 2013 in order to finalize proposals on a regulatory framework for haircuts on non-centrally cleared securities financing transactions. The second stage consists of a comprehensive quantitative assessment of the impact on a broader set of firms of the FSB's detailed haircut proposals, including the proposed minimum standards for methodologies used by firms in calculating their own haircuts and the numerical haircut floors to be applied to certain securities financing transactions.

Click here for the FSB’s press release. Click here for the Policy Framework. Click here for the Overview of Policy Recommendations.


On November 4, 2013, the Consumer Financial Protection Bureau (CFPB) responded via letter (CFPB Letter) to concerns raised by 22 U.S. Senators in a letter dated October 30, 2013 (October 30 Letter) regarding the CFPB’s actions with respect to certain retail financing practices that the CFPB believes are discriminatory.

In response to the Senators’ question as to why the CFPB chose to issue a guidance bulletin on March 21, 2013 (CFPB Auto Bulletin) rather than using the Administrative Procedure Act’s (APA) rulemaking process, the CFPB Letter stated that the CFPB Auto Bulletin was published “to remind lenders” of their Equal Credit Opportunity Act (ECOA) responsibilities and that the APA “does not impose a notice and comment requirement for general statements of policy, non-binding informational guidelines, or interpretative memoranda.” In response to the Senators’ request for the full range of the CFPB’s coordination with the Federal Reserve Board and Federal Trade Commission concerning the development of the guidance, the CFPB Letter stated only that the CFPB “advised” the Federal Reserve Board and Federal Trade Commission about the bulletin prior to its publication. In response to the October 30 Letter regarding the CFPB’s methodology, the CFPB Letter stated that the CFPB uses a proxy methodology based on publicly available databases to identify potential discrimination based on gender, race or ethnicity.

The discussions with the Senators will likely continue on November 12, 2013, when CFPB Director Richard Cordray will give the U.S. Senate Banking Committee the CFPB's semiannual report. Six of the twenty committee members signed the October 30 Letter. In addition, the CFPB has announced on its web site that it plans to host an auto finance forum at its Washington headquarters on November 14, 2013. The CFPB's web site states that the forum will include remarks from Mr. Cordray and "a discussion with consumer groups, industry representatives and members of the public."

In the CFPB Auto Bulletin, the CFPB stated that lenders are responsible for policing dealers more closely to make sure legally protected classes pay the same amount of dealer reserve as everyone else. Dealer reserve is a small amount of additional interest built into the customer's interest rate, paid out as a lump sum to the dealership as compensation for originating the finance contract. The CFPB Auto Bulletin states that the present method by which dealers are being compensated for negotiating loans at the dealership is problematic, but that compensating dealers for negotiating loans is permissible. As one alternative, the CFPB Auto Bulletin suggested switching to flat fees per transaction.

Click here for the CFPB Letter. Click here for the Senators’ October 30 Letter. Click here for the CFPB Auto Bulletin.


On November 1, 2013, the Office of the Comptroller of the Currency (OCC) released the economic and financial market scenarios that will be used in the next round of stress tests for large financial institutions. The scenarios include baseline, adverse, and severely adverse scenarios, as described in the OCC’s final rules that implement stress test requirements of the Dodd-Frank Act.

Concurrently, the OCC also issued the final “Policy Statement on the Principles for Development and Distribution of Annual Stress Test Scenarios” (Policy Statement). The guidance outlines the consultative processes that the OCC will use to gather information on material vulnerabilities or salient risks and to coordinate with the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation to develop the scenarios each year.

Section 165(i)(2) of the Dodd-Frank Act requires certain financial companies, including national banks and federal savings associations with total consolidated assets of more than $10 billion, to conduct annual stress tests. On October 9, 2012, the OCC published its final annual stress test rule, which sets out definitions and rules for scope of application, scenarios, reporting, and disclosure. The rule also states that the OCC will provide the required scenarios to the covered institutions by November 15 of each year. The 2014 scenario information can be found on the OCC web site. The Policy Statement on the Principles for Development and Distribution of Annual Stress Test Scenarios was issued on October 28, 2013, in the Federal Register.

Click here for the OCC web site. Click here for the 2014 Stress Test Scenario Information. Click here for the Policy Statement on the Principles for Development and Distribution of Annual Stress Test Scenarios.


On October 31, 2013, Financial Industry Regulatory Authority, Inc. (FINRA) filed with the Securities and Exchange Commission (SEC) a proposed rule change to amend the FINRA Rule 6700 Series and the Trade Reporting and Compliance Engine (TRACE) dissemination protocols to disseminate additional Asset-Backed Securities transactions and, concomitantly, to reduce the reporting periods for such securities. FINRA also proposes (i) to re-name as "Securitized Products" the broad group of securities currently defined as "Asset-Backed Securities," (ii) to re-define the term Asset-Backed Security more narrowly to mean the specific securities that FINRA proposes to disseminate in the proposed rule change, (iii) to make other definitional changes and (iv) to incorporate technical and conforming amendments to the FINRA Rule 6700 Series and FINRA Rule 7730 in connection with provisions that have expired and the amendments referenced above.

As re-defined in proposed FINRA Rule 6710(cc), the term "Asset-Backed Security" means “a type of Securitized Product collateralized by any type of financial asset, such as a consumer or student loan, a lease, or a secured or unsecured receivable, but excluding: (i) an Agency Pass-Through Mortgage-Backed Security. . ., To Be Announced (TBA) securities. . . and Specified Pool Transactions. . .; (ii) an SBA-Backed ABS. . . traded TBA or in a Specified Pool Transaction; and (iii) a Collateralized Mortgage Obligation.” FINRA believes that the proposed additional price transparency in the Asset-Backed Securities market will enhance the ability of investors to identify and negotiate fair and competitive prices for Asset-Backed Securities, noting that dissemination of Asset-Backed Securities transactions may assist both buy- and sell-side market participants in price discovery when pricing and trading such securities.

FINRA officials estimate that the proposed changes will not result in any undue burden on competition for its members since they already are required to report such transactions. FINRA is not requesting that its members cancel or correct trades already submitted to the reporting facilities.

Click here for the amended rule text. Click here for FINRA’s regulatory notice.


On October 30, 2013, the Federal Housing Finance Agency released its Annual Housing Report to the Senate Committee on Banking, Housing, and Urban Affairs and the House Committee on Financial Services, pursuant to Section 1125 of the Housing and Economic Recovery Act of 2008. The report provides information regarding Fannie Mae and Freddie Mac's housing activities in 2012, including affordable housing goals, single-family mortgages and high-cost securitized mortgages, among other things.

Click here for the FHFA Annual Housing Report.


On October 3, 2013, researchers released a study (CARD Act Study) analyzing the effectiveness of consumer financial regulation by considering the 2009 Credit Card Accountability Responsibility and Disclosure (CARD) Act in the United States.

Four researchers, including one from the Office of the Comptroller of the Currency, looked at 150 million credit card accounts. They estimate the CARD Act saved consumers $20.8 billion a year. Overall, the law reduced borrowing costs by 2.8% of average daily balances. For customers with lower credit scores, who paid the most on their cards previously, the savings jumped to more than 10% of average daily balances.

The CARD Act Study also found that credit cards did produce less income for banks after the law was enacted, but that the CARD Act did not (i) cause credit card issuers to significantly increase interest rates to compensate for lost fee revenue and (ii) constrict the availability of credit.

Click here for the CARD Act Study.



ABS Vegas 2014 – January 21-24, Las Vegas, Nevada.

Momentum is continuing to build. The preliminary agenda has been released and the speaker nomination process has begun. SFIG is now accepting sponsorship contracts for this conference. If you are interested, please contact SFIG.

Click here for the preliminary agenda, the speaker nomination form and more information about the conference.



SFIG has a number of Committees and Task Forces meeting and working on many topics of interest to the securitization industry. Please visit our website 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 ( to learn about membership opportunities.


Contact Information

For all matters, please contact Richard Johns.

For Investor related matters, please contact Kristi Leo.

For ABS Policy related matters, please contact Sairah Burki.

For MBS Policy related matters, please contact Sonny Abbasi.


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