October 1, 2014 Newsletter

SFIG News

SFIG Calendar

Advocacy Outlook

Issue Spotlight

Industry News Highlights

Upcoming Events in Washington

 
SFIG NEWS
SFIG FILES AMICUS CURIAE BRIEF WITH U.S. SUPREME COURT IN TRUTH IN LENDING ACT CASE

On September 23rd, SFIG filed an Amicus Curiae brief (“Brief”) in support of Countrywide Home Loans, Inc. with the United States Supreme Court in the case of Jesinoski v. Countrywide Home Loans, Inc.  At issue was whether a borrower exercises his right to rescind a transaction under the Truth in Lending Act (“TILA”) by “notifying the creditor” within three years or must a borrower file a lawsuit. SFIG asked the Supreme Court to consider the impact on the securitization of mortgages, including on representations and warranties made in transactions.  Alston & Bird served as counsel to SFIG in the drafting and submission of the Brief.  

 
 
ATTENDANCE AT ABS EAST 2014 REACHES RECORD HIGH WITH NEARLY 4,000 DELEGATES ONSITE

SFIG was proud to be the Lead Association Partner for last week's 20th Anniversary ABS East conference, hosted by IMN. The event welcomed nearly 4,000 industry participants, which included over 1,600 investors and issuers, a new record for the ABS East franchise. Featuring keynote addresses from Patrick Pinschmidt (U.S. Department of Treasury) and Joseph Smith (The National Mortgage Settlement), the ABS East program delved into the core issues facing the securitization industry. The program also incorporated a highly successful and well-attended symposium dedicated to marketplace lending.

ABS East attendees can find the full collection of presentations from Miami by clicking this link

 
 
REGISTRATION NOW OPEN FOR SFIG’S FALL SYMPOSIUM

SFIG is pleased to announce our 2014 Fall Symposium, Around the SFIG World in 80 Minutes, on October 21, 2014.  The event will feature industry experts speaking on topical securitization issues in which SFIG is involved.  Topics to be addressed include Risk Retention, Derivatives, Regulation AB II, RMBS 3.0, LCR implementation, the new NRSRO rules, and other current and impending issues.  The event will be followed by a cocktail reception.  Additional details are listed below.

TUESDAY, October 21, 2014
5:00 p.m. – 8:00 p.m. (EST)

Offices of Ernst & Young
5 Times Square
New York, NY 10036

Unfortunately, space is limited. We are unable to accommodate press at this event.

Registration is open to SFIG members and non-member industry participants. Please click here to register.

 
 
SFIG/IMN RMBS SYMPOSIUM AGENDA NOW AVAILABLE

The agenda is now available for SFIG & IMN’s 1st Annual Private Label RMBS Reform Symposium, taking place November 12th in New York City. Join hundreds of your peers as we address the major obstacles that remain in the revitalization of a private label RMBS market, and explore potential solutions.

Featuring keynote speaker, Michael Stegman of the U.S. Department of the Treasury, this one-day gathering will serve as the first step towards rebuilding this essential private mortgage credit market. Speaking firms include: Babson Capital Management, Blackrock, Clayton Holdings LLC, Credit Suisse, Dentons, Deutsche Asset Management, Doubleline Group, Fenway Summer, Mayer Brown, Metlife, Moody's Investors Service, Nationstar Mortgage, Prudential Investment Management Inc., Redwood Trust, Inc, Shellpoint Partners, Stonegate Mortgage Corporation, The National Mortgage Settlement, Vanguard Group, and Wells Fargo.

The real-time agenda and full speaker faculty are available.  You can also register online.

The timing of the symposium is in concert with SFIG’s expected release of its RMBS 3.0 “Green Papers” Second Edition in early November.  SFIG’s RMBS 3.0 Initiative (“RMBS 3.0”) is a broad industry supported endeavor that is designed to develop proposed standards and reduce substantive differences within current market practices. 

 
 
REGISTER FOR SFIG’s NEW WEBSITE!

Following last week’s launch of our new website, SFIG is proud to again highlight our new and improved platform.

We invite you to take the opportunity to visit www.sfindustry.org and learn more about SFIG’s activities across all aspects of the industry. We have enhanced and expanded upon the presentation and delivery of content, including:

  • Information and Education: The SFIG Library, Advocacy and Newsroom sections include a wealth of content on the securitization industry, including proposed and final rules, legislation, research papers, news stories, speeches, SFIG comment letters and more.
  • Events: The SFIG Events section lists upcoming conferences and symposiums covering the securitization and structured finance industry.
  • Newsletter: Users can view and register for SFIG’s newsletter which reaches over 7,000 readers each week.

To help SFIG better serve our members, please take a few moments to complete the Member Registration form, available on the website—registration is fast and straightforward.  By creating your member account, you can highlight your individual areas of interest, and allow SFIG to deliver more tailored information, specific to your needs.

Industry participants that are not yet members can also find additional information on membership and its benefits, dues, and a Membership Application Form via our website.

 
 
SFIG CALENDAR
EXTERNAL COUNSEL SUBCOMMITTEE CALL

THURSDAY, October 2, 2014
11:00 a.m. – 12:00 p.m. (EST)

 
 
RMBS 3.0 REPRESENTATIONS, WARRANTIES, AND REPURCHASE ENFORCEMENT WORKING GROUP CALL

FRIDAY, October 3, 2014
3:00 p.m. – 4:00 p.m. (EST)

 
 
REGULATORY CAPITAL & LIQUIDITY COMMITTEE CALL

MONDAY, October 6, 2014
1:00 p.m. – 2:00 p.m. (EST)

 
 
DERIVATIVES IN SECURITIZATION TASK FORCE CALL

WEDNESDAY, October 8, 2014
11:00 a.m. – 12:00 p.m. (EST)

 
 
CHINESE MARKET COMMITTEE CALL

MONDAY, October 20, 2014
9:00 a.m. – 10:00 a.m. (EST)

 
 
SFIG FALL SYMPOSIUM

TUESDAY, October 21, 2014
5:00 p.m. – 8:00 p.m. (EST)
Ernst & Young
5 Times Square
New York, NY  10036
Registration available here. Agenda will be forthcoming.

*Please note, this event is closed to the press.

 
 
SFIG & IMN PRIVATE LABEL RMBS REFORM SYMPOSIUM

WEDNESDAY, November 12, 2014
New York Marriott Downtown
New York City, NY
Registration available here

 
 
REAL ESTATE SUMMIT 2014: PARTNERING FOR CHANGE IN CALIFORNIA

FRIDAY, November 14, 2014
9:30 a.m. – 4:00 p.m. (PDT)
Hyatt Regency Century Plaza
2025 Avenue of the Stars
Los Angeles, CA 90067 

Richard Johns will be speaking on the “Solutions for a Recovering Market: Housing Affordability and Financing Homeownership” panel.

 
 
PLI SEMINAR: NEW DEVELOPMENTS IN SECURITIZATION 2014

THURSDAY, December 4, 2014
PLI New York Center
1777 Avenue of the Americas
New York City, NY

Richard Johns will be speaking on the “Examining Key Regulations Through a Global Lens” panel.

 
 
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.

The RMBS 3.0 Task Force continues to work towards completing its Second Edition RMBS 3.0 Green Papers.  The Task Force continues to address issues specific to private label mortgage securities on 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 additional information on RMBS 3.0, or to join the Task Force, please contact Mary.Robinson@sfindustry.org.

The GSE Reform Task Force has been actively engaging the Federal Housing Finance Agency ("FHFA") in recent months, with SFIG submitting comments on guarantee fee pricing and FHFA’s Strategic Plan for 2015-2019. The Task Force is currently developing a response to its proposed structure for a single agency security, which must be submitted by October 13, 2014. The Task Force previously reviewed various proposals in Congress including the Johnson-Crapo bill, with SFIG staff summarizing members’ recommendations in a briefing book, and the PATH Act. If you would like to learn more about SFIG’s activities in these areas, 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 in February of this year. SFIG also continues to have weekly Mortgage Industry Standards Maintenance Organization calls to go through data elements that lenders should deliver in securitizations. We will also be conducting an analysis of the data elements included in SFIG’s Schedule L submission in order to determine any privacy concerns. Please contact Alyssa.Acevedo@sfindustry.org for additional information on SFIG’s work on this topic.

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

The Risk Retention Committee is continuing to follow up with regulators on risk retention questions across asset classes. Please contact Alyssa.Acevedo@sfindustry.org with any questions.

SFIG’s Chinese Market Committee will hold its next call on Monday, October 20th at 9:00 a.m. (EST). Future calls will continue to focus on to discuss a high-level description of SFIG’s partnership with the Chinese Securitization Forum, potential upcoming educational discussions and a sharing of recent market developments in China. If you would like more information on SFIG’s work with respect to Chinese securitization, please contact Alyssa.Acevedo@sfindustry.org.

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

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

The Task Force will have its first full meeting in the coming weeks, and members from across asset classes are encouraged to participate. To register your interest in SFIG’s Shadow Banking Initiative, please contact Amanda.Bateman@sfindustry.org.

The Regulation AB II Task Force will focus on the disclosure and offering process requirements within the final rule. Monthly task force calls will be held to identify and address key questions regarding the implementation of the final rule. We will also be holding bi-weekly calls for the asset-level committees. 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 forming a working group to address industry concerns related to the Federal Reserve Board’s Final Rule on the Liquidity Coverage Ratio (“LCR”). To become involved in SFIG’s advocacy on the Final LCR rule, please contact Mary.Robinson@sfindustry.org.

The Derivatives in Securitization Task Force will meet on Wednesday, October 8th at 11:00 a.m. (EST) to discuss the CFTC’s proposal on margin requirements for uncleared swaps, which SFIG will provide comments on. The Task Force will also be commenting on the prudential regulators’ proposal regarding margin and capital requirements for covered swap entities. SFIG submitted a comment letter at the end of June, advocating for asset-backed securities issuers to qualify for the “low-risk financial end user” designation proposed by prudential regulators in the original proposal. SFIG members who are interested in learning more about this initiative should email Amanda.Bateman@sfindustry.org.

The Credit Rating Reform Task Force met last week to discuss the SEC’s recent Final Rules with respect to Nationally Recognized Statistical Rating Organizations ("NRSROs") and third party due diligence services for transactions involving registered and private asset-backed securities with assigned credit ratings. The rules are meant to enhance governance, protect against conflicts of interest, and increase transparency to improve the quality of credit ratings and improve rating agency accountability, according to the SEC, but will likely impact a broader range of industry participants than NRSROs. SFIG will continue to work with our members to better understand the rules and those interested in participating should contact Amanda.Bateman@sfindustry.org.

The Money Market Reform Fund Working Group will be submitting a comment letter on the Securities and Exchange Commission’s July 23rd 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.

 
 
ISSUE SPOTLIGHT

The release of the final risk retention rules is likely imminent. SFIG would like, therefore, to provide a refresher of the August 2013 reproposal. For a thorough review provided by Mayer Brown please see here.  Once the final rules are released, SFIG will provide an in-depth summary and analysis for its membership.

If you would like join the Risk Retention Committee please contact Alyssa.Acevedo@sfindustry.org.

 
 
INDUSTRY NEWS HIGHLIGHTS
BASEL ENDORSEMENT OF NSFR

On Thursday, the Basel Committee announced the endorsement of the final details of Basel III's net stable funding ratio (“NSFR”). The NSFR focuses on stable longer-term sources of funding and ensuring bank liquidity beyond the 30-day window addressed by the Liquidity Coverage Ratio (“LCR”). According to the chairman of the Basel Committee, Stefan Ingves, “The NSFR complements the [LCR]…and ensures that a bank maintains a stable funding profile in relation to the composition of its assets and off-balance sheet activities.”

The NSFR defines the instruments permitted for use in the numerator and denominator, and provides that banks hold “available” stable funding greater than or equal to “required” stable funding.  Notably, the endorsement follows clarifications to the NSFR Consultative Document (released in January 2014) relating to the treatment of certain deposits and secured funding instruments as well as the definition of “high quality liquid assets.”

The final NSFR standard will be released in the coming weeks and the Basel Committee aims for it to take effect in 2018.  It is still uncertain whether U.S. regulators will adopt the Basel NSFR or, as with the LCR, adopt a more stringent standard.  If you are interested in joining the Regulatory Capital and Liquidity Committee, please contact Alyssa.Acevedo@sfindustry.org

 
 
EC PROPOSAL ON BETTER TREATMENT FOR QUALIFYING SECURITIZATIONS PLANNED FOR OCTOBER

A top official from the European Commission (“EC”) told lawmakers in Brussels on Monday that highly anticipated legislative proposals which would result in lower capital requirements on securitized products for banks will be released in early October. According to Internal Market Commissioner Michael Barnier, “We will identify high quality securitization and propose positive treatment for the securitized assets going to the real economy.” The proposal would allegedly apply to high quality securitizations backed by mortgage debt, loans for small businesses and consumer debt and is part of a series of “delegated acts” under Europe’s Capital Requirements Directive IV which has yet to be voted on. The law would transpose new global standards on bank capital found inside the Basel III agreement and is part of the EC’s ongoing efforts to stimulate capital markets in Europe and channel funding to the real economy. 

 
 
DEMAND INCREASES IN ANTICIPATION OF ECB BUYING

Investors are taking positions as the European Central Bank’s (“ECB”) new bond-buying program is expected to come into effect soon, according to a Reuters article. Asset-backed securities (“ABS”) traders have noted an increase in bid lists during recent weeks following the announcement of ECB President Mario Draghi’s ABS revival plan.

The program will target senior notes and guaranteed mezzanine positions together with a covered bond buying scheme on Thursday. This has many market participants ramping up bond prices across asset classes, according to Reuters. Although Draghi has stated that the ECB is looking to buy both senior and mezzanine tranches, serious debate about how this purchase plan would work has resulted in officials from the French and German governments opposing the guarantee of junior bonds.

Last week, Germany’s finance minister Wolfgang Schäuble stated, “I am not particularly happy about the debate started by the ECB about the purchase of securitization products.” A paper from both the German and French governments also noted that, “Investors could be tempted to rely on the guarantee rather than to conduct their due diligence by examine the transition and underlying assets, and it would be very difficult for the public sector to disengage without undermining the market.”

Tomorrow, the ECB is expected to announce details of a plan to buy hundreds of billions of euros of repackaged debt in order to kick-start bank lending, according to a Financial Times article. Many within the industry believe that this revival will permit banks to trim down their balance sheets and free up capital for lending. Mr. Draghi also pointed out previously that the central bank will not take too much risk on to its balance sheet without the backing of lawmakers.

 
 
FHFA INSPECTOR GENERAL CALLS FOR THIRD-PARTY ATTESTATIONS OF COMPLIANCE WITH GSE ORIGINATION AND SERVICING GUIDELINES

The Federal Housing Finance Agency’s (“FHFA”) Office of Inspector General (“OIG”) recommended in a report that FHFA direct the Government Sponsored Enterprises (“GSEs”) Fannie Mae and Freddie Mac “to assess a risk-based approach to having their counterparties obtain independent, third-party attestations of their compliance with origination and servicing requirements to increase assurance that the $4.8 trillion in Enterprise-owned and –guaranteed mortgages are appropriately originated and serviced.”  These attestations would be in addition to the GSEs’ monitoring and onsite reviews and would be based on a cost/benefit analysis of counterparty size, complexity, performance, and other risk factors. 

The FHFA OIG pointed out that, as a best practice, other entities involved in the mortgage market and private investors in mortgage-backed securities commonly require independent assurance of counterparty compliance.  The GSEs typically rely on a delegated business model to buy and service mortgage loans, according to the report.  The most recent report came on the heels of an earlier report in September in which the OIG stated that many representation and warranty relief provisions, such as a 36-month sunset period, could “unduly benefit sellers [to the GSEs] at the Enterprises’ expense.”  

 
 
NRSRO AND REGULATION AB II FINAL RULES PUBLISHED IN FEDERAL REGISTER

On September 15th, the Nationally Recognized Statistical Rating Organizations (“NRSRO”) final rule that applies to providers of third-party due diligence services for asset-backed securities was published in the Federal Register. The NRSRO final rule will be effective on November 14, 2014, except the amendments to § 240.17g–3(a)(7) and (b)(2) and Form NRSRO, which are effective on January 1, 2015; and the amendments to § 240.17g-2(a)(9), (b)(13) through (15), § 240.17g–5(a)(3)(iii)(E), (c)(6) through (8), § 240.17g–7(a) and (b), and Form ABS–15G, which are effective June 15, 2015. The addition of §§ 240.15Ga–2, 240.17g–8, 240.17g–9, 240.17g–10, and Form ABS Due Diligence–15E are effective June 15, 2015.

On September 24th, the Regulation AB II final rule for asset-backed securities disclosure and registration was also published in the Federal Register. The Regulation AB II final rule will be effective on November 24, 2014, and the compliance date for asset-level disclosures will be November 23, 2016.

If you are interested in joining SFIG’s Regulation AB II Task Force, please contact Alyssa.Acevedo@sfindustry.org. Our Credit Rating Reform Task Force will focus on the NRSRO final rule. If you are interested in this task force, please contact Amanda.Bateman@sfindustry.org

 
 
MOODY’S FINDS SHADOW BANKING RISKS IN CHINA REMAIN SIGNIFICANT DUE TO GROWTH, LENDING CONCENTRATION

Recent improvements in data may have improved transparency in China’s shadow banking system, but a recent Moody’s report finds its rapid growth and lending concentrations continue to pose significant risk to the Chinese financial system. According to the first edition of its Quarterly China Shadow Banking Monitor, shadow banking activity has shown faster growth than nominal GDP, increasing from 52 percent of the economy at the end of 2012 to 66 percent at the end of 2013. While 2014 figures suggest the growth of credit in this sector may have begun to stabilize in recent quarters as bank lending increases, China’s financial system remains highly leveraged, with trust products and wealth management products seen as the fastest growing liabilities. Risks due to property exposures are also increasing, with mortgage and infrastructure exposures now accounting for one third of all trust loan exposures.

Given the elevated liquidity risk, maturity mismatches and refinancing pressures in China’s economy, Moody’s expects further stresses to surface within the sector, though contagion risk may be contained in the near-term. SFIG will be addressing the issues associated with China’s asset securitization program via two workstreams: the Chinese Market Committee and the Shadow Banking Committee. Interested members should contact Alyssa.Acevedo@sfindustry.org to join the Chinese Market Committee or Amanda.Bateman@sfindustry.org to join the Shadow Banking Task Force.

 
 
HUD SECRETARY CASTRO AND GINNIE MAE PRESIDENT TOZER ADDRESS HOUSING INDUSTRY AT SUMMIT

On September 22nd, U.S. Department of Housing and Urban Development (“HUD”) Secretary Julián Castro delivered his keynote speech at the second annual Ginnie Mae Summit. According to their press release, Castro focused on how the housing industry may “work together to see a robust, healthy housing market where those who are ready can buy a home.”

Ginnie Mae also announced plans to unveil key program and policy initiatives that are designed to meet the evolving needs of the housing finance industry and respond to the recent mortgage market. These include updating its policies and programs to preserve the integrity and sound administration of its mortgage-backed securities (“MBS”) program and establishing measures to better manage resources and risks.

“Ginnie Mae’s primary goal has been, and always will be, to protect and preserve the utility, relevance and remarkably successful track record of the Ginnie Mae MBS program,” said Ginnie Mae President Ted Tozer. “The agency’s pioneering role in the creation of a securities market for mortgage loans, its continued ability to refine the program as necessary to maintain its unblemished record of profitable operation over decades of market change and disruption is a testament to the power of a well-conceived and executed government effort to support the healthy functioning of a sizable and critical private sector function.”

 
 
UPCOMING EVENTS IN WASHINGTON
FINANCIAL STABILITY OVERSIGHT COUNCIL MEETING

MONDAY, October 6, 2014
U.S. Treasury Department
Washington, DC
A webcast of the Open Session will be available here

On Monday, Secretary Lew will preside over a meeting of the Financial Stability Oversight Council (“Council”) at the Treasury Department. The agenda will include both an executive and an open session. The preliminary agenda for the executive session includes a discussion of nonbank financial company designations and a discussion of the Council’s ongoing work on asset management. The preliminary agenda for the open session includes a presentation by the Office of Financial Research regarding progress on and next steps for the Council’s 2014 annual report recommendations on data gaps and data quality.

 
FEDERAL DEPOSIT INSURANCE CORPORATION 4TH ANNUAL CONSUMER RESEARCH SYMPOSIUM

THURSDAY, October 16, 2014 – FRIDAY, October 17, 2014
FDIC L. William Seidman Center
Hove Auditorium
3501 Fairfax Drive
Arlington, VA 22226
Registration is available here

This symposium will focus on the recent research on consumers’ capabilities, knowledge, preferences, and experiences in the market for financial products and services, as well as the effects of public policy interventions and new regulations on consumers, households, communities, and financial institutions.

 

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 Policy Manager

Alyssa Acevedo Policy Analyst

Amanda Bateman Policy Analyst

Jennifer Serpas Office Manager

Allison Creswell Executive Administration


1775 Pennsylvania Ave. NW
Suite 625
Washington, DC 20006

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