November 18, 2015 Newsletter
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November 18, 2015
 
 
SFIG News

Industry Jobs

SFIG Calendar

Meetings

Events

Advocacy Outlook

Industry News Highlights

 
SFIG NEWS
JOINT-TRADE LETTER ON BASEL COMMITTEE FRTB SUBMITTED TO REGULATORS

On November 12th, as part of a joint-trade effort, SFIG submitted a comment letter to Treasury and the Federal Reserve regarding Basel's Fundamental Review of the Trading Book (“FRTB”). This letter highlighted the concerns regarding the impact to securitization and requested the regulators’ continued attention to this issue. The letter also expresses a connection between the high capital charges the proposal would require, reduced market making, and reduced credit availability. The Basel FRTB working group is finalizing their proposal and the Basel Committee itself is meeting at the beginning of December.

 
 
CONGRESSMAN ROYCE, SEC CHAIR WHITE TO WORK ON FULL mREIT PARTICIPATION IN AGENCY CRT TRANSACTIONS

This morning, Securities and Exchange Commission (“SEC”) Chair Mary Jo White testified before the House Committee on Financial Services regarding funding for the agency. During the hearing, Congressman Ed Royce (R-CA) discussed the desire to increase private capital in the housing market through Fannie Mae and Freddie Mac’s credit risk sharing (“CRT”) programs. Mr. Royce stated that an increased investor base is required to grow the CRT market, and a logical participant would be Real Estate Investment Trusts (“REIT’s”). “REIT’s are a logical investor in these transactions…Could you work with us to clarify that all of these CRT’s qualify as good REIT assets that do not undermine investor protections?” asked Mr. Royce.

“Surely, we would be happy to work with you on that,” responded Chair White.   

SFIG has long advocated for clarification of mREIT rules to allow for full participation in CRT transactions, and increase the amount of private capital in the housing sector. Contact Michael.Flood@sfindustry.org to learn more about SFIG’s Congressional outreach efforts.

 
 
ONLY TWO DAYS REMAIN TO SUBMIT ABS VEGAS 2016 SPEAKER NOMINATIONS!

As a reminder, please submit your speaker nominations by this Friday, November 20th for ABS Vegas 2016!

ABS Vegas 2016 momentum continues to be incredibly strong, with over 100 sponsors to-date and many more in process. SFIG members may complete the online form to nominate a speaker for the ABS Vegas 2016 conference by clicking here. Non-members may fill out the form by clicking here.

Please email Events@sfindustry.org if you have any questions.

 
 
SFIG AND IMN HOST SUCCESSFUL PRIVATE LABEL RMBS REFORM SYMPOSIUM

Last Thursday, November 12th, SFIG and IMN welcomed more than 400 industry members to the Second Annual Private Label RMBS Reform Symposium in New York. The event, attended by investors and issuers, as well as representatives from the servicing, trustee, and data/analytics communities, provided a forum for candid conversations on industry approaches to restoring a vibrant PLS market.

The symposium followed the release of SFIG’s RMBS 3.0 Third Edition Green Papers, which included a complete representations and warranties framework, as well as a proposed transaction parties matrix incorporating the role of Deal Agent.

Throughout the day, participants heard perspectives from various industry participants on a range of topics including regulatory reform, investor perspectives, and strategies for encouraging issuer adoption of proposed best practices. It was clear that the Deal Agent role and various considerations for how that party operates within an RMBS transaction are of key importance to the industry. 

SFIG thanks all participants for contributing their candid thoughts and offering further considerations to help work towards restoration of a vibrant PLS market.

 
 
INDUSTRY JOBS

SFIG currently has a position open for:

  • Communications and Media Manager: will be an integral member of SFIG staff, providing support across the whole organization and serving as a vital link between SFIG, its membership and other external audiences. Additional information on the position, as well as a link to the application, is available here.

Some of the latest industry positions available include:

JOB TITLE   COMPANY POSTING DATE
Associate Analyst 2   Moody’s Corporation 11-02-15
Senior Vice President, RMBS Monitoring   Moody’s Corporation 11-02-15
Vice President, Senior Credit Officer   Moody’s Corporation 11-02-15
CLO Legal Analyst   Moody’s Corporation 11-02-15
AVP - Analyst   Moody’s Corporation 11-02-15
Lead Ratings Analyst – Asset Backed Securities Group (Student Loans)   Moody’s Corporation 11-02-15
Senior Vice President Operational Risk Assessment Analyst   Morningstar Credit Ratings, LLC 10-29-15
High Yield - Legal Analyst   Babson Capital Management 10-22-15
Finance Associate   Hogan Lovells US LLP 10-09-15
Attorney - Securitization   Ford Motor Credit Company 9-29-15

Please visit our Jobs page for a full listing of available positions.

For questions about positions at SFIG, please contact Jobs@sfindustry.org. For questions about the website jobs portal, please contact Website@sfindustry.org.

 
 
SFIG CALENDAR
MEETINGS
WEEKLY CREDIT CARD ISSUER COMMITTEE CALLS
  • THURSDAY, November 19, 2015
    10:00 a.m. – 11:00 a.m. (EST)
  • TUESDAY, November 24, 2015
    4:00 p.m. - 5:00 p.m. (EST)
 
 
LEGAL COUNSEL COMMITTEE CALL

THURSDAY, November 19, 2015
1:00 p.m. – 2:00 p.m. (EST)

 
 
MARKETPLACE LENDING COMMITTEE CALL

FRIDAY, November 20, 2015
1:00 p.m. – 2:00 p.m. (EST)

 
 
BIWEEKLY RISK RETENTION INDUSTRY GUIDE CALL

TUESDAY, November 24, 2015
11:00 a.m. – 12:00 p.m. (EST)

 
 
BIWEEKLY AUTO ISSUER COMMITTEE CALL

WEDNESDAY, November 25, 2015
2:00 p.m. – 3:00 p.m. (EST)

 
 
EVENTS
MECKLENBURG COUNTY BAR CONTINUING LEGAL EDUCATION - 15th BANKING AND FINANCE FORUM

FRIDAY, November 20, 2015
9:00 a.m. – 4: 00 p.m. (ET)
Charlotte, NC

  • Michael Flood will speak on the “Legislative Developments in Banking” panel
 
 
SFIG WiS PROFESSIONAL NETWORKING WORKSHOP

TUESDAY, December 8, 2015
4:00 -7:00 p.m. (ET)
Mayer Brown LLP
New York, NY
Registration available here

 
 
SFIG BOARD OF DIRECTORS MEETING

WEDNESDAY, December 9, 2015
12:00 p.m. – 5:00 p.m. (ET)
Deloitte & Touche
New York, NY
Note: Closed Meeting

 
 
SFIG & IMN's ABS VEGAS 2016 CONFERENCE

SUNDAY, February 28, 2016 – WEDNESDAY, March 2, 2016
The Aria Resort & Casino
Las Vegas, NV
Registration is available here.

 
 
ADVOCACY OUTLOOK

If you would like to participate in the work SFIG is undertaking through our committees as highlighted below, please e-mail Committees@sfindustry.org. For specific inquiries on any of SFIG’s advocacy efforts, please contact the staff member listed for the related project.

SFIG’s Marketplace Lending Committee was established in August 2015, as an SFIG participant committee and is open to all SFIG members who have a legitimate interest in marketplace lending. The committee was formed with two primary intentions: 1) to work with members involved in marketplace lending to educate the industry as a whole, with a particular focus on the securitization of assets generated through that lending channel; and 2) to determine appropriate securitization-specific policy and engage in related advocacy, leveraging SFIG’s prominence and experience across all asset classes to support the continued responsible growth of securitization in marketplace lending. For its first initiative, the committee commented on the Treasury Department's Request for Input on Online Marketplace Lending. The comments were submitted on September 30th and drafted by counsel at Chapman and Cutler LLP.

Members interested in participating should contact Amanda.Bateman@sfindustry.org.

SFIG’s Student Loan Committee recently responded to the Proposed Changes to Moody’s Approach to Rating Securities Backed by FFELP Student Loans.

To join SFIG’s Student Loan Working Group and learn more, please contact Alyssa.Acevedo@sfindustry.org.

The RMBS 3.0 Task Force released its Third Edition RMBS 3.0 Green Papers in November 2015. The task force has continued 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. We encourage members to participate in any or all of the working groups to contribute towards the mission of RMBS 3.0. For its 2016 agenda, the task force will address topics including the inclusion of an independent Deal Agent in transactions, Bondholder Communications, Data and Loan-Level Disclosure, Repurchase Enforcement, and Settlements, as well as undertake a review of the previously published Green Papers.

For additional information on RMBS 3.0, or to join the task force or RMBS Issuer Subcommittee, please contact Amanda.Bateman@sfindustry.org.

The GSE Reform Task Force submitted its comments on FHFA’s update to the single security initiative on October 7, 2015. The task force also recently received an update from the SFIG participants on the Industry Advisory Group for the Common Securitization Platform and Single-Security. The task force has also formed policy positions on the Carney-Delaney-Himes GSE Reform bill and updated its briefing book 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. Additionally, the task force will continue to engage the Federal Housing Finance Agency on its Single-Security proposal, guarantee fee pricing and Strategic Plan for 2015-2019.

To join SFIG’s GSE Reform Task Force and learn more, please contact Amanda.Bateman@sfindustry.org.

The Mortgage Loan-Level Disclosure Task Force is studying the recent Regulation AB II release of Schedule AL and comparing it to SFIG’s Schedule L submission to the Securities and Exchange Commission in February 2014. SFIG also continues to have weekly Mortgage Industry Standards Maintenance Organization calls to go through data elements that lenders should deliver in securitizations. The task force will also be conducting an analysis of the data elements included in SFIG’s Schedule L submission in order to determine any privacy concerns.

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

The Volcker Task Force has been working with SFIG’s various asset class and legal counsel committees to identify areas within the Volcker Rule in need of clarification, particularly questions regarding covered funds and the loan securitization exemption.

Please contact Amanda.Bateman@sfindustry.org to participate on the Task Force.

The Risk Retention Industry Guide Working Group is creating best practices and developing consensus positions around several areas within the Credit Risk Retention final rule.

Please contact Alyssa.Acevedo@sfindustry.org with any questions.

SFIG’s Chinese Market Committee 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 Alyssa.Acevedo@sfindustry.org.

SFIG’s Shadow Banking Task Force has established the following agenda:

  • Leverage the predictive powers of the G20’s shadow banking initiative to determine future SFIG advocacy initiatives
  • Assess the level of regulation to which our members are already subject
  • Measure the full impact of those regulations on lending decisions and business models
  • Provide input into IOSCO, BCBS and IAIS on the revitalization of securitization markets

To register your interest in SFIG’s Shadow Banking Initiative, please contact Amanda.Bateman@sfindustry.org.

The Regulation AB II Task Force will focus on the disclosure and offering process requirements within the final rule. Two work streams have been formed to develop a comment letter on the proposed rules that remain outstanding and to produce an industry guide for critical elements of the final rule.

SFIG members who are interested in joining this task force or asset specific committees should contact Alyssa.Acevedo@sfindustry.org.

The Regulatory Capital and Liquidity Committee is addressing industry concerns related to the Federal Reserve Board’s Final Rule on the Liquidity Coverage Ratio (“LCR”). This committee will also develop a comment letter when U.S. regulators release their proposed Net Stable Funding Ratio (“NSFR”).

To become involved in SFIG’s advocacy on the final LCR or NSFR rules, please contact Alyssa.Acevedo@sfindustry.org.

The Derivatives in Securitization Task Force obtained no-action relief from the CFTC giving swap dealers comfort that the CFTC would not take enforcement action against swap dealers that did not comply with certain CFTC Regulations when taking actions in response to the credit ratings downgrade of a counterparty to a legacy swap. The relief applies to swaps with SPVs that were in existence prior to October 10, 2013. The task force also commented on the CFTC’s proposal on margin requirements for uncleared swaps, as well as the prudential regulators’ proposal regarding margin and capital requirements for covered swap entities.

SFIG members who are interested in learning more about this initiative should email Amanda.Bateman@sfindustry.org.

The Money Market Fund Reform Working Group submitted a comment letter on October 13, 2014 regarding the Securities and Exchange Commission’s July 23, 2014 proposal which includes, among other things, possibly amending rule 2a-7’s issuer diversification provisions to eliminate an exclusion that is currently available for securities subject to a guarantee issued by a non-controlled person. SFIG also submitted a comment letter in September 2013 on Money Market Fund Reform.

If you are interested in joining this working group, please contact Alyssa.Acevedo@sfindustry.org.

The High Quality Securitization ("HQS”) Task Force responded to the European Commission’s consultation on an EU framework for simple, transparent and standardized securitization on May 12, 2015. The task force also previously responded to the BCBS-IOSCO consultation on its criteria for identifying simple, transparent and comparable securitizations. SFIG’s comments were built off of those sent to the European Banking Authority on January 14th (available here) regarding its proposed criteria and to the European Central Bank and Bank of England last summer (available here) regarding the development of a sustainable securitization market in Europe.

To join the HQS Task Force, please contact Amanda.Bateman@sfindustry.org.

 
 
INDUSTRY NEWS HIGHLIGHTS
FINAL SWAPS MARGIN RULES COULD INCREASE ABS FUNDING COSTS

New rules for posting margin on uncleared swaps will come into effect next year, likely increasing “the cost of financing everything from autos and housing to industrial equipment” according to an article published last week in Asset Securitization Report. The article explains how the new margin requirements for uncleared swaps impact securitization financing, as swaps used for hedging interest rate risk in securitizations tend to be “bespoke and don’t fit the more standardized formats required for clearing.”

In addition to the additional costs that will come with the margin requirements, the article also highlights SFIG’s view that “ample collateralization in many securitizations – along with the fact that swaps are typically at the top of the priority of payments in a securitization – are good reasons for exempting these deals from margin requirements.”

The article outlines three possible outcomes from the new rules. The first, according to Sairah Burki, Senior Director at SFIG is that “we might see [issuers] go to markets other than ABS to finance their activities.” The second is that issuers may not include uncleared swaps in securitizations – this could make financing more expensive “since investors would presumably demand to be compensated for the additional risk, particularly now as rates are headed higher.” Finally, issuers may choose to hedge interest rate risk using interest rate caps instead, “a method already employed in some deals.” The article concludes by noting that although existing deals are grandfathered under the new margin rules, “an amendment to an existing swap, for instance, could trigger requirements” for posting margin. 

The rules become effective in April 2016, and will begin phasing in next September. SFIG previously advocated for an exemption for securitization special purpose vehicles to qualify as “low risk financial end users,” and presented criteria for such an exemption and highlighted the impact the rules would have on the securitization industry.

 
 
WHITE HOUSE ISSUES VETO THREAT AGAINST PORTFOLIO LENDING SAFE HARBOR BILL

On Tuesday, November 17th, the White House issued a veto-threat against H.R. 1210, the Portfolio Lending and Mortgage Access Act of 2015. H.R. 1210 would broaden the definition of “qualified mortgages” to include all mortgages held on a lender’s balance sheet. Such loans would receive the same legal safe harbor that “qualified mortgage” loans receive, as long as they remain on the originator’s balance sheet. The House is expected to pass the bill this afternoon, along party lines. However, H.R. 1210 could be attached as an amendment to the two-year funding agreement reached between Congress and the White House, thus testing the viability of President Obama’s veto threat. The funding bill must be signed into law by December 11th, or the Federal government will essentially shut down.

 
 
FITCH PROPOSES AMENDMENTS TO FFELP STUDENT LOAN ABS RATING METHODOLOGY 

Today, November 18th, Fitch Ratings announced that they have published an exposure draft detailing proposed amendments to its rating criteria for U.S. Federal Family Education Loan Program (“FFELP”) student loan ABS. The main proposals upon which feedback is sought include:

  • Revised assumptions and stresses for deferment, forbearance, IBR, default timing and prepayments
  • New surveillance application methodology

Fitch Ratings estimates that approximately 35 to 45 percent of existing FFELP student loan ABS tranches would be downgraded based on this new methodology while approximately 35 percent of current subordinate bond ratings could be lowered to non-investment grade

Fitch Ratings will be accepting feedback on the proposals during the consultation period that will end on December 31, 2015. 

 
 
RISING INTEREST RATES COULD THREATEN CMBS

According to an article in Investor’s Business Daily, CMBS are beginning to experience losses in a number of maturing loans, which could worsen if interest rates rise. “About 7.5% of the maturing notes that paid off through October, for example, experienced losses totaling $1.5 billion, or an average of about 34% per loan,” said Joe McBride, Research Associate with Trepp. While some analysts had expected an uptick in delinquencies as the peak of maturities comes due, this threat has been held off by rebounding property values and low interest rates that facilitated refinancing activity. “More than 90% of CMBS loan balances are paying off within 90 days following the maturity date,” reported Morningstar and about “80% of the $75 billion in CMBS loans maturing through October this year have paid off,” according to Trepp.

 
 
REP. GARRETT SAYS COVERED BONDS LEGISLATION POSSIBLE

Congressman Scott Garrett (R-NJ) recently stated that covered bond legislation might be possible after the debt ceiling is raised. As SFIG reported last week, Congressman Garrett provided the keynote speech at SFIG and IMN’s Private Label RMBS Reform Symposium held on November 12th. Responding to a question after his speech, Garrett said that lifting the debt ceiling “may open the floodgates” for a Senate bill on covered bonds.

According to the Congressman, such a bill would have previously been difficult to envisage as Democrats were unwilling to work across parties lines due to the looming debt ceiling issue. As stated in a National Mortgage News article on the comments, legislation on covered bonds, seen as an alternative to mortgage financing, has previously stalled in the U.S. due to concerns raised by the Federal Deposit Insurance Corporation and Treasury Department. It remains to be seen whether anyone in the Senate will propose such a bill.

 
 
FINANCIAL STABILITY BOARD PUBLISHES RULES TO REIN IN SHADOW BANKS

On Thursday, November 12th, the Financial Stability Board (“FSB”) published its latest reports on the issue of shadow banking, including final recommendations on global haircuts that must be applied to securities financing transactions between non-banks. As explained in a Reuters article on the topic, the recommendations address how collateral used for backing transactions must be discounted. Under the FSB recommendations, numerical haircut floors for securities against cash transactions have been set at 6 percent for main index equities, i.e. a non-bank would have to post $106 in shares for every $100 borrowed.

The FSB was given a mandate by the G20 after the global financial crisis to strengthen oversight and regulation of shadow banking. While it operates as an advisory body and therefore is not explicitly empowered to implement its recommendations, members of the FSB include financial regulators around the world. In the U.S., FSB members include the Federal Reserve Board (“FRB”), Securities and Exchange Commission, and Department of Treasury. Regarding the framework on haircuts, FRB Governor Daniel Tarullo offered his support, stating “The extension of the scope of the securities financing regulatory haircut floor framework to cover transactions between non-banks will limit regulatory arbitrage and prevent the build-up of excessive leverage and liquidity mismatch in the non-bank financial system.”

 
 
IRS RELEASES GUIDANCE FOR STUDENT LOAN BONDS

On November 13th, the Internal Revenue Service (“IRS”) released guidance clarifying that state student loan programs can use tax-exempt bonds to fund loans to parents of students and that tax-exempt bonds can be used for a broad range of refinancing that help student loan borrowers take advantage of lower rates, according to a recent Bond Buyer article. This guidance applies to student loans made on or after February 11, 2016 and may be applied to earlier loans.

The guidance was sought because of a private letter ruling the IRS issued last year that was favorable but limited in concluding that an unidentified authority could issue tax-exempt bonds and use the proceeds to fund loans to refinance outstanding loans in a consolidation loan program. This ruling covered a narrow type of refinancing and caused market participants to worry the IRS would not favorably treat other kinds of refinancings, according to the article.

The IRS made clear that tax-exempt bonds can be used for refinancings of other types of original loans such as those that are federally-guaranteed or private, as long as they meet the same requirements as for state loans.

 
 
SFIG COMMITTEES AND TASK FORCES

SFIG has a number of Committees and Task Forces meeting and working on many topics of interest to the securitization industry. Please email us for more information, including how to join.

SFIG is pleased to share this edition of its newsletter with our members, as well as our supporters in the structured finance community. To ensure that you receive future editions of the newsletter, please visit our website or email us to learn more about membership opportunities.

Contact Information

Richard Johns Executive Director

Kristi Leo Investor Relations

Sairah Burki Senior Director, ABS Policy

Michael Flood Director, Advocacy

Dan Goodwin Director, Mortgage Policy

Jennifer Wolfe ABS Policy Manager

Mary Robinson Policy Manager

Alyssa Acevedo Senior Analyst, ABS Policy

Amanda Bateman Policy Analyst

Daniel Tees Policy Analyst

Jennifer Serpas Office Manager

Allison Creswell Events Coordinator

Sarah Clarke Executive Administration

1775 Pennsylvania Ave. NW
Suite 625
Washington, DC 20006

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