September 25, 2013 Newsletter
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September 25, 2013


Issue Spotlight

Recent Developments


Staff of Representative Maxine Waters (D-CA), the Ranking Member of the U.S. House of Representatives’ Committee on Financial Services, invited SFIG representatives to meet on September 27, 2013 to discuss SFIG’s views on housing finance reform issues. Representative Waters has announced plans to introduce her own version of housing finance reform legislation. The invitation follows testimony on September 12, 2013 by SFIG Executive Director Richard Johns before the Senate Banking Committee on the subject.

Click here for a recent statement from Representative Waters on housing finance reform. Click here for the House Financial Services Committee Democrats’ position on housing finance reform.


On September 24, 2013, SFIG announced that it has elected a permanent Board of Directors (Board) consisting of representatives from 40 member organizations. Reggie Imamura of PNC Financial Services Group will serve as chairman of the Board, with Christopher Haas of Bank of America Merrill Lynch as vice chairman, Gregg Silver of 1st Financial Bank USA as treasurer and Jordan Schwartz of Cadwalader, Wickersham & Taft LLP as secretary.

The Board will oversee all of SFIG’s activities including directing policy initiatives, advising on advocacy efforts, organizing educational events and ensuring the organization properly represents the full spectrum of views of its members. As previously announced, Richard Johns, Executive Director of SFIG, will report to the Board.

“The elections mark an important milestone for our organization, which has rapidly become a recognized voice in the securitization industry thanks to the hard work of our dedicated membership,” said Mr. Imamura. “I am pleased to help lead this impressive gathering of industry leaders to support SFIG as it continues to grow.”

Driven by a commitment to represent all member constituencies’ viewpoints – a foundational principle for the organization that is included in the group’s bylaws - the Board has a balanced allocation from key member groups including eight directors each from investors, banks and issuers. Other groups represented include accounting firms, rating agencies, law firms, servicers, research firms, trustees and one at-large representative. The Board also includes an allocation for one member organization that has a defined tie in to the Association for Financial Markets in Europe (AFME) to aid communication and coordination between the two organizations. Board members will serve two year terms with no more than half of the Board up for election each year. As a result, half of the current Board will initially serve a one-year term.

In addition to the full Board, SFIG also announced that it has elected chairpersons for its approximately 30 committees and task force working groups. Additional details on the committees and chairpersons will be available shortly at SFIG’s website; These committees are tasked with guiding critical initiatives for the membership including organizing SFIG’s annual conference in January and leading near-term advocacy efforts such as SFIG’s recent amicus curiae brief filed in support of the plaintiffs against Richmond, California’s inappropriate use of eminent domain.

“Since our founding, SFIG has felt strongly in being open and transparent with all our stakeholders,” said Richard Johns, Executive Director of SFIG. “This is why we put on our website, our member list, policy platform and now our committees. These teams are on the front lines of driving our organization so it is critical for all our members to understand what is being planned and who are the people leading these initiatives.”

A full list of SFIG’s Board is below.


  • Chair: Reggie Imamura, PNC Financial Services Group
  • Deputy Chair: Christopher Haas, Bank of America Merrill Lynch
  • Secretary: Jordan Schwartz, Cadwalader, Wickersham & Taft LLP
  • Treasurer: Gregg Silver, 1st Financial Bank USA

Executive Committee

  • Tom Davidson, GE Capital
  • Howard Kaplan, Deloitte & Touche LLP
  • Valerie Kay, Morgan Stanley
  • Samuel Smith, Ford Motor Credit Company
  • Kevin Sweeney, Discover Financial Services

Board Members

  • Jim Ahern, Societe Generale (AFME member)
  • John Arnholz, Bingham McCutchen LLP
  • Bob Behal, Vanguard
  • Allan Berliant, GMO LLC
  • Andy Berman, Fortress Investment Group LLC
  • Christopher DiAngelo, Katten Muchin Rosenmann LLP
  • Sean Dobson, Amherst Securities Group, LP
  • Dave Duzyk, JPMorgan Chase & Co.
  • Pat Evans, Wilmington Trust Company
  • Bill Felts, Citigroup, Inc.
  • Lisa Filomia, Ernst & Young LLP
  • Tom Finke, Babson Capital Management LLC
  • Steven Grundleger, Ocwen Financial Corporation
  • Tricia Hazelwood, Mitsubishi UFJ Financial Group, Inc.
  • Jay Kim, Credit Suisse Group AG
  • Jason Kravitt, Mayer Brown
  • Gary Horbacz, Prudential Investment Management
  • Steve Kudenholdt, Dentons
  • Pia McCusker, State Street Global Advisors
  • Claire Mezzanotte, DBRS Inc.
  • Tim Mohan, Chapman and Cutler LLP
  • William Moliski, Redwood Trust, Inc.
  • Doug Murray, Fitch Ratings
  • Ned Myers, Lewtan
  • Christopher Pink, Wells Fargo Bank N.A.
  • Saul Sanders, Shellpoint Partners LLC
  • Brad Schwartz, Blue Mountain Capital Management LLC
  • Faith Schwartz, CoreLogic
  • Susan Sheffield, General Motors Financial Company, Inc.
  • Diane Wold, Two Harbors Investment Corp.


Effective September 24, 2013, SFIG has hired Sonny Abbasi as Director focused on mortgage backed securities policy issues and Sairah Burki as Director focused on asset backed securities policy issues. Both Mr. Abbasi and Ms. Burki will report directly to SFIG’s Executive Director, Richard Johns.

“We are excited to add these talented senior executives to the SFIG team, each of whom brings an impressive depth of industry knowledge and current policy experience to the organization,” said Mr. Johns. “Given the diversity and complexity of regulatory proposals being considered and their potential impact the securitization industry, it was clear to us that SFIG’s membership would be best served by adding expertise related directly to housing reform as well as broader capital market efforts. With Sonny and Sairah, we are confident SFIG can holistically approach these important policy issues.”

In his role, Mr. Abbasi will work with a specific focus on the residential mortgage market, including GSE reform and efforts to support a robust and sustainable return of private capital to the private label RMBS market. Prior to joining SFIG, Mr. Abbasi served as Director of MBS Policy at Fannie Mae, where he assessed compliance with Fannie Mae’s MBS policies and determined eligibility of products for securitization. Before Fannie Mae, he worked at McKee Nelson LLP and Orrick, Herrington & Sutcliffe LLLP, where he specialized in structured finance. Mr. Abbasi has a Bachelor of Arts from George Washington University and a Juris Doctorate from American University.

Ms. Burki will focus on the current plethora of proposed and anticipated rules that have broad impact across all ABS asset classes. Her agenda will include such areas as Basel III, Risk Retention, Money Market Reform, Reg AB II and Credit Rating Agency Reform. Ms. Burki joins SFIG from Capital One, where she was most recently the Director of Treasury Policy Affairs, leading the company’s response to policy initiatives with significant capital markets and corporate finance implications. She previously held positions with Xerox, UBS and the Federal Reserve Bank of New York. Ms. Burki holds a Bachelor of Arts from Princeton University and a Masters in Business Administration from the University of Pennsylvania’s Wharton School.


Members of SFIG’s Residential Mortgage Committee have completed their work in producing a “White Paper,” entitled “Residential Mortgage Finance: An Introductory Framework” (White Paper) on the private label RMBS market.

The White Paper was produced to establish a “common understanding of how the residential mortgage market, including private label RMBS, functions.” Among the uses of the White Paper will be to serve as a briefing document for regulators and policymakers on SFIG’s understanding of the residential mortgage market and such market’s role in the broader U.S. economy.

Click here for the White Paper.





On September 9, 2013, the New York State Energy Research and Development Authority (NYSERDA) filed a petition (Petition) with the New York State Public Service Commission (NYSPSC) in connection with the establishment of the New York State Green Bank (Green Bank). Among the primary mandates of the Green Bank is the facilitation of securitization for renewable energy technologies.

Among the products that the Green Bank is anticipating offering are warehouse lines for pooling financial assets such as solar panel leases and power purchase agreements, the taking of “first loss” positions in renewable energy securitizations and the issuance of guarantees of ABS backed by financial assets originated by renewable energy project developers.

The Green Bank initiative was proposed by New York Governor Andrew Cuomo in his January 2013 “State of the State” address, and is broadly designed to use public funds to stimulate the growth of New York’s clean energy economy.

The securitization of financial assets related to renewable energy projects – particularly solar panels – has been talked about in ABS circles extensively over the past several years. However, the execution of such transactions has proved to be a challenging goal. This has been the case even though numerous studies have demonstrated that securitization has substantial cost advantages over current financing techniques for renewable energy projects, and even though market penetration of solar energy has grown at a rapid and increasing rate.

Several other states have renewable energy financing programs. Additionally, the federal government, through the Department of Energy’s National Renewable Energy Laboratory (NREL) “solar access to public capital” (SAPC) working group, has provided a forum for industry participants to develop a framework for solar securitization. The New York State initiative, however, is perhaps the most flexible and comprehensive government approach to date. Unlike some of the other programs, the Green Bank will commit capital to specific transactions.


In April of 2013, NREL released a report entitled “Financing U.S. Renewable Energy Projects Through Public Capital Vehicles: Qualitative and Quantitative Benefits” (NREL Report).

The NREL Report identified four vehicles that it refers to as “public capital vehicles,” meaning vehicles that issue securities that are regularly traded and priced by the market. The NREL Report cites several public capital vehicles as having a good potential application to renewable energy:

  • asset-backed securities;
  • structured debt products;
  • master limited partnerships (MLPs); and
  • real estate investment trusts.

Renewable energy projects such as solar panel projects are developed so that the power generated is sold through a long-term power purchase agreement (PPA), or the equipment is leased to an entity that hosts the system (such as solar panels on a rooftop) and uses the generated power. Renewable energy projects generally result in long-term, relatively stable cash flows that appear to be well suited to the technique of securitization.

Financing available for renewable energy projects is currently driven in large part by several tax policies at the federal level. The NREL Report characterizes these policies into two broad categories:

  • tax credits: either production tax credits (PTCs), that are historically available to wind, geothermal, biomass technologies, or investment tax credits (ITCs) that are historically available for solar and
  • accelerated depreciation benefits provided through the 5-year Modified Accelerated Cost Recovery System, relative to a straight-line depreciation over a longer period.

According to the NREL Report, these tax benefits, when combined, currently represent 50%-55% of a project’s installed cost. Renewable energy developers themselves generally do not have sufficient taxable income to take advantage of these benefits. The practice has thus developed that these projects include third-party investors knows as “tax equity investors” that invest in the projects.

“Structuring projects to attract tax equity investors has proven to be a time-consuming and expensive process” notes the NREL Report. The NREL Report further observes that the list of qualifications to be a tax equity investor is so great that there are only about 20 such entities currently active, and that they collectively have supplied only $3-$6 billion per year in each of the past several years to the entire renewable energy industry. The NREL Report concludes that “[t]he limited supply of tax equity essentially caps the number of renewable energy projects that are deployed each year.”

In comparing the costs of capital between tax equity and public capital vehicles, NREL found the following:

Cost of Capital, Market Size, and Investors –
Tax Equity Versus Pubic Market (U.S. Only)


Cost of Capital

Market Size – Securities Outstanding
(billions of dollars)

Tax equity
  Utility-scale, unlevered


Public capital vehicles
  Mortgage-backed securities
  ABS (non-mortgages)
  Debt products




N/A (approximately 20 firms, mostly financial)



It is also important to realize that the tax benefits for renewable energy projects are being phased out. The PTC is set to expire for large wind projects that have not begun construction by December of 2013, and in 2017 the ITC will be reduced from 30% to 10% for solar projects. These changes will presumably reduce tax investors’ appetite for these transactions and provide more opportunity to utilize the public capital vehicles.

Of the pubic capital vehicles identified by NREL as alternative financing techniques, two require legislative or regulatory changes to enable them to be used by the renewable energy industry. Master limited partnerships are limited by current law only to the energy extraction and transportation industries, and cannot be used for renewable energy projects. U.S. Senators Chris Coons (D-DE), Jerry Moran (R-KS) and Debbie Stabenow (D-MI) have introduced the “Master Limited Partnerships Parity Act” that would extend access to master limited partnerships to renewable energy projects. As for REITs, substantial difficulties may be encountered under current Internal Revenue Service regulations in characterizing renewable energy projects as being “real property” within the meaning of the REIT rules.

Thus, perhaps the best alternative financing techniques are ABS and structured debt issuance.

Barriers to the Use of Securitization 

The application of securitization technology to renewable energy financing has proved challenging. Among the reasons frequently cited are:

  • Securitization may be difficult to integrate into tax-equity based financing structures. For existing projects, securitization would be an add-on to the previously-established financing. Decisions would need to be made about the seniority of the securitization’s claim on cash flows. In addition, federal income tax “recapture” provisions may be triggered if foreclosure remedies are enforced at least during the first five years of a project’s life.
  • The rating agencies have yet to settle on a paradigm for this asset class. With respect to residential solar, which is probably the renewable that has received the most attention, the rating agencies have not yet determined what pre-existing asset class provides the best model. Residential mortgage loans, unsecured consumer debt and leases are considered possibilities.
  • There is a lack of standardization in the underlying loan, lease and PPAs that may make a pool more difficult to diligence and analyze.
  • There is a lack of performance data over time, with respect to the performance of the equipment as well as the performance of obligors. Residential solar has the additional issue of what happens when the house is sold – in particular, how inclined would a new owner be to continue the solar contract.

The SAPC project through NREL is primarily, although not exclusively, working on the last two bullet points, and has published standard contracts for the 0% down Residential Lease and the Commercial PPA.

There are some other features of renewables that distinguish them from existing securitized assets that are being given substantial thought by developers and marketers of potential securitization transactions. These unique features include:

  • The characterization of the renewable product being sold or leased. Is it physical equipment, is it electricity, or is it the notion of “savings” – that an individual or a business primarily installs renewable technology to achieve savings on the total cost of electricity?
  • Rather than characterize seriously delinquent contracts as being “in default,” the solar industry characterizes them instead as having had an “interruption” in performance. The belief is that, sooner or later, a new obligor will step in and resume making payments.

What the Green Bank May Offer

In response to Governor Cuomo’s initiative announced in January, NYSERDA retained the consulting firm Booz & Co. (Booz) to perform a market assessment (Booz Report) of existing market gaps, identify potential Green Bank financing products to address those gaps and analyze the potential impacts of the deployment of the Green Bank’s financing.

Using the Booz Report as its base, NYSERDA’s NYSPSC filing states that NYSERDA has identified a number of “market gaps” that result from certain barriers that constrain the renewable energy financing market:

including new bank capital rules that curtail lending in the space (particularly for smaller project sizes and larger tenor loans), federal policy uncertainty, insufficient data on underlying loan and technology, performance, and the underdeveloped or non-existent state of publicly-traded capital markets for clean energy.

The Green Bank is seeking the PSC’s approval to reallocate $165 million in uncommitted NYSERDA funds to serve as the Bank’s initial capitalization, and expects to grow that capital to $1 billion. This capital will be used to “kick start” the renewable energy financing market in New York State.

In terms of securitization, it is anticipated that the Green Bank may facilitate such transactions both by acting as a warehouse lender and by assuming a “first loss” position in securitization transactions.

The Green Bank’s greatest potential to “kick start” a securitization approach to renewable energy financing may be the possibility of it assuming a first loss position in a securitization transaction. The first loss position may be represented by the provision of a loan loss reserve, the purchase by the Green Bank of a subordinate tranche of a securitization or the issuance of a credit guaranty “wrap” of a securitization.

The Green Bank also proposes to assist in financings deeper down in the credit spectrum, as low as 600 FICO for residential customers and “class 3” businesses for commercial and industrial customers.

By covering some of the risks of a securitization, the Green Bank could take some of the pressure off of both the rating agencies and the initial investors, which should facilitate structuring as well as marketing.

NYSERDA believes that the Green Bank can reduce the overall cost of capital to the renewable energy sector by increasing overall market activity, targeting market inefficiencies, and creating greater transparency around risk.

Of course, the Green Bank’s focus presumably will be limited to New York State projects, so it is unlikely to be permitted to participate in transactions that do not have a New York State focus.

The PSC is soliciting comments on NYSERDA’s petition relating to the Green Bank. Comments are due by October 28, 2013.

If you are interested in joining SFIG’s Esoterics Committee, please contact SFIG at

Click here for the Petition. Click here for the Booz Report. Click here for the NREL Report.


On September 24, 2013, the Bipartisan Policy Center released a report (BPC Report) examining the first three years of the Consumer Financial Protection Bureau (CFPB). The BPC Report includes several recommendations for the CFPB and Congress to improve the state of consumer protection, increase the efficiency of the financial services industry and improve the quality of regulation.

The BPC Report recommended that the CFPB set up formal timelines for finishing examinations — a key issue for banks and other firms seeking clarity about where they stand. The BPC Report notes that many institutions are concerned about the level of turnover and lack of experience among the CFPB’s examiners.

Overall, the BPC Report concludes that when the CFPB operates in a transparent, open, and iterative manner, repeatedly seeking input from all stakeholders throughout a process, the results were generally positive. The CFPB was able to meet its statutory deadlines on a series of complex rules, while considering comments and revising initial findings to improve the final product. However, when the CFPB made unilateral decisions, rolled out initiatives, rules, or processes through a more closed, internal deliberation process, the results were far more likely to be problematic. The BPC Report noted sometimes the CFPB went back, sought input, and improved the end result, but sometimes the CFPB did not. The BPC Report praised the CFPB for several rules, including those governing mortgage lending and remittance transfers.

The BPC Report recommends that overarching performance metrics for the CFPB be created. Those metrics should be driven by considerations focused on both the CFPB’s internal activities and the impact the CFPB has on consumers and the financial marketplace. The BPC Report also recommends that the CFPB should devote additional resources to the supervision of providers of nonbank financial products and services and be more transparent in their regulatory process. In addition, the BPC Report recommends that the CFPB establish a “notice-and-comment like” procedure so that the CFPB can obtain greater input from a diverse group of interested parties, including both consumer groups and regulated entities.

Click here for the BPC Report.


The Equipment Leasing and Finance Association’s (ELFA) Monthly Leasing and Finance Index (MLFI-25), showed overall new business volume for August of 2013 in the equipment leasing and finance sector was $6.4 billion, down 7% compared to volume in August of 2012. Month-over-month, new business volume was down 11% from July. Year to date, cumulative new business volume increased 8% compared to 2012. The index reports economic activity from 25 companies representing a cross section of the $725 billion equipment finance sector.

Receivables over 30 days delinquent were at 1.6% in August, up slightly from 1.5% in July. Delinquencies declined from 1.9% in the same period in 2012. Charge-offs increased slightly to 0.4% after being unchanged for the previous five months at the all-time low of 0.3%.

Credit approvals totaled 79.1% in August, up from 78.6% the previous month and 56% of participating organizations reported submitting more transactions for approval during August, down from 58% the previous month. Finally, total headcount for equipment finance companies was up 0.8% year over year.

Click here for more information related to the index.


On September 20, 2013, the Financial Stability Oversight Council (FSOC) announced that it made a final determination pursuant to Section 113 of the Dodd-Frank Act that Prudential Financial, Inc. (Prudential) was a “systemically important financial institution” (SIFI) that could pose a threat to U.S. financial stability were it to be in financial distress. As a result of this determination, Prudential will be subject to supervision by the Board of Governors of the Federal Reserve System (Federal Reserve) and enhanced prudential standards.

Prudential is the third company that has been subject to final SIFI designation by the FSOC. In July of 2013, the FSOC designated American International Group, Inc. and General Electric Capital Corporation, Inc. for consolidated supervision and enhanced prudential standards. Under a separate authority, in July of 2012, the FSOC designated eight systemically important financial market utilities for enhanced risk-management standards.

In its decision, the FSOC noted that “[a] liquidation of a significant portion of Prudential’s assets could cause significant disruptions to key markets including the corporate debt and asset-backed securities markets, particularly during a period of overall stress in the financial services industry and in a weak macroeconomic environment, when liquidity dries up and price swings can be magnified.”

The FSOC generally assesses nonbank financial companies in a thorough, three-stage process. In Stage 1, the FSOC applies uniform quantitative thresholds to identify nonbank financial companies for further evaluation. In Stage 2, it analyzes the nonbank financial companies identified in Stage 1 using a broad range of information available to the FSOC primarily through existing public and regulatory sources. In Stage 3, it contacts each nonbank financial company that it believes merits further review to collect information directly from the company that was not otherwise available in the prior stages. Each nonbank financial company that is reviewed in Stage 3 is notified that it is under consideration and is provided an opportunity to submit written materials related to the FSOC’s consideration of the company for a proposed designation.

Click here for more details regarding the basis for Prudential’s SIFI designation.


On September 20, 2013, the Federal Reserve Bank of New York (New York Fed) announced that it had completed the first test of an overnight fixed-rate full allotment reverse repurchase agreement facility.

A fixed-rate, full allotment overnight reverse repo facility is a facility in which the Federal Reserve posts a fixed interest rate and accepts cash from counterparties, which include banks, dealers, money market funds, and some government-sponsored entities (GSEs), on an overnight basis in return for a security. If implemented, the facility would be “full allotment,” meaning the facility would have no cap on the amount of funds accepted from any of its counterparties at the posted overnight interest rate. The repo facility is “reverse” because of the direction in which the funds and securities move—participants are lending funds to the Fed rather than vice versa.

Users of the facility are making the economic equivalent of an overnight collateralized loan of cash to the Fed. The amount of funds invested in the facility is likely to be sensitive to the posted interest rate. The higher the interest rate relative to comparable money market rates, the greater the participation is likely to be and vice versa. The tool is designed to mop up excess cash in the financial system, which if left unchecked could keep rates lower than perhaps desired by the Fed at a later date.

In the testing phase, the Fed allotted $11.8 billion in overnight reverse repos through the facility at a fixed-rate of 0.01%. The operation was open to the Fed’s 139 tri-party reverse repo counterparties, which includes 94 money market mutual funds, six GSEs, 18 banks and the Fed’s 21 primary dealers. Each eligible counterparty was limited to a maximum bid amount of $500 million. The collateral for the transactions was limited to Treasury debt.

The New York Fed said in a statement on Sept. 20 that “[t]his exercise is not intended to materially affect the current level of short-term interest rates,” “This work is a matter of prudent advance planning” and “do not represent a change in the stance of monetary policy,” the statement said.


On September 20, 2013, the Federal Housing Finance Agency (FHFA) launched a nationwide campaign to inform homeowners about the Home Affordable Refinance Program (HARP). The campaign is designed to encourage homeowners who have been making their mortgage payments, but who owe more than their home is worth, to contact their current lender or any other mortgage lender offering HARP refinances to review their refinancing options. With mortgage rates still historically low and HARP eligibility requirements expanded, qualifying homeowners could reduce their monthly mortgage payments or increase their equity faster with a shorter term mortgage.

As part of this campaign, FHFA has launched a new website,, and is working with mortgage companies across the U.S. and HGTV personality and star of Power Broker Mike Aubrey to help reach homeowners who may qualify.

To be eligible for a HARP refinance, homeowners must meet the following criteria:

  • The loan must be owned or guaranteed by Fannie Mae or Freddie Mac.
  • The mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31,


  • The current loan-to-value (LTV) ratio must be greater than 80%.
  • The borrower must be current on their mortgage payments with no late payments in the last six months and no more than one late payment in the last 12 months.

The FHFA and the U.S. Department of the Treasury introduced HARP in early 2009 as part of the Making Home Affordable program. HARP is one of the only refinance programs that enables borrowers with little to no equity in their homes to take advantage of low interest rates and other refinancing benefits. Since its inception, more than 2.8 million homeowners have refinanced through HARP and significant enhancements have allowed more borrowers to take advantage of the program.


On September 19, 2013, the Federal Housing Finance Agency (FHFA) announced that it is expanding the agency’s regular reporting on Fannie Mae, Freddie Mac and the Federal Home Loan Banks (FHLBanks). The new FHFA Quarterly Performance Report (Performance Report) provides a summary of data available in Fannie Mae, Freddie Mac and the FHLBanks’ individual public filings, including some combined trends. The first Performance Report covers the second quarter of 2013 and includes key market drivers such as house prices, average interest rates, and swap rates.

The Performance Report also includes a quarterly update on the conservatorships of Fannie Mae and Freddie Mac. The new enhanced report will be produced quarterly and the FHFA Conservator’s Report will continue on an annual basis.

Click here for the September 2013 Performance Report.


On September 18, 2013, the Consumer Financial Protection Bureau (CFPB) launched an online tool to provide the public with easy access to public mortgage information collected under the Home Mortgage Disclosure Act (HMDA). The tool enables greater transparency by helping users follow trends in local mortgage markets.

The CFPB tool focuses on the number of mortgage applications and originations, in addition to loan purposes and loan types, for 2010 through 2012. It looks specifically at first-lien, owner-occupied, one- to four- family and manufactured homes. Using the tool, the public can see nationwide summaries or they can choose interactive features allowing the isolation of metropolitan areas. The public can explore millions of data points through “user-friendly” graphs and charts.

Trends and highlights from the information shown by the tool include:

  • Heat map shows that mortgage applications and originations were up. The CFPB tool contains a nationwide heat map showing that applications and loan originations increased in most local mortgage markets in 2012. This tool allows users to drill down to see this information by metropolitan area. The data shows:
  • Nationwide, loans for home purchases increased by 13% from 2011 to 2012.
  • In most counties across the country, mortgage applications were down from 2010 to 2011, but they rebounded in 2012.
  • Of the nearly 13 million applications in 2012 for home purchase loans, home improvement loans, and refinancing, more than 8 million resulted in loan originations.
  • The number of loan originations increased by about 2.4 million, or 39%, from 2011 to 2012.
  • Interactive graph shows that mortgage volume increased, driven by refinancing. An interactive graph in the CFPB tool, which breaks down the number of loans by purpose and by metropolitan area, shows:
    • The number of refinancing applications increased from 6.6 million in 2011 to 9.3 million in 2012.
    • The number of refinance loan originations increased from 3.8 million in 2011 to 5.9 million in 2012, representing a 54% increase.
    • Refinance origination activity continues to vary by location. For example, Cincinnati, Ohio experienced a 47% increase while Las Vegas, Nevada saw an increase of 205%.
  • Interactive graph on loan type shows the prevalence of FHA and VA lending. An interactive graph in the CFPB tool, which breaks down the number of loans by type and by metropolitan area, shows:
    • In 2012, FHA- and VA-backed loans accounted for about 15% and 7%, respectively, of home purchase, refinance, and home improvement loans combined. In 2011, these figures were 18% and 6%, respectively.
    • Areas with large numbers of military families often have a higher share of VA lending, as seen in metropolitan areas such as Gulfport, Miss., where 21% of loans were VA, and Fairbanks, Alaska, where 29% of loans were VA.

Click here for the CFPB’s online HMDA tool.


Mortgage rates fell last week, following the September 18, 2013 announcement by the Federal Reserve Open Market Committee (FOMC) that it would delay the “tapering” of its bond buying program. Mortgage rates have climbed more than one percentage point since May when speculation began that the FOMC would start winding down its $85 billion per month bond buying program, which had helped keep mortgage rates low.

Freddie Mac reports the following national averages with mortgage rates for the week ending Sept. 19:

  • 30-year fixed-rate mortgages: averaged 4.50%, with an average 0.7 point, dropping from last week’s 4.57% average. Last year at this time, 30-year fixed-rate mortgage averaged 3.49%.
  • 15-year fixed-rate mortgages: averaged 3.54%, dropping from last week’s 3.59% average. Last year at this time, 15-year rates averaged 2.77%.
  • 5-year adjustable-rate mortgages: averaged 3.11%, dropping from last week’s 3.22% average. A year ago, 5-year ARMs averaged 2.76%.
  • 1-year ARMs: averaged 2.65%, dropping from last week’s 2.67% average. A year ago, 1-year ARMs averaged 2.61%.

The National Association of Realtors announced on September 19, 2013 that existing home sales increased 1.7% to an annual rate of 5.48 million units last month, the highest level since February 2007 when property values began to decline after the sector's boom and subsequent bust.

Click here for the FOMC announcements regarding its bond buying program.


On September 18, 2013, the U.S. House of Representatives Committee on Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises held a hearing entitled "Examining the SEC's Money Market Fund Rule Proposal," regarding the Securities and Exchange Commission's (SEC) proposed rules on money market mutual funds (MMFs). Witnesses included industry representatives.

The overall SEC initiative is intended to strengthen MMFs and ensure that investors are investing in safe and high-quality securities in light of the financial crisis of 2008. In June 2013, the SEC unanimously approved for comment a proposal that would either move the fixed $1 net asset value (NAV) to a floating NAV, impose liquidity fees and redemption gates, or a combination of both proposals. In advance of the hearing, the Systemic Risk Council, headed by former FDIC Chair Sheila Bair, who testified at the hearing, submitted comments to the SEC requesting the agency revise proposed rules to require all funds move to a floating NAV as the current proposal will be inadequate to protect the financial system. However, not all witnesses at the hearing agreed that regulations should be strengthened, with Georgia State Treasurer Steve McCoy testifying that the reforms would lead to higher financing cost to issuers of short-term municipal securities. Similarly, several members, including Representative Randy Hultgren (R-IL) expressed concerns with the proposed changes because of the detrimental impact they could have on state and local governments.

Many state and local governments look to MMFs as part of their cash management practice because they are highly regulated and have minimal risk. Many governments even have specific policies and laws for the investment of public funds that mandate the use of MMFs for short and mid-term investments due to the fixed NAV feature of MMFs. Additionally, because MMFs are the largest investor in short-term municipal bonds, any impact would also be felt in the municipal market and could result in higher debt issuance costs for state and local governments.

While Representative Scott Garrett (R-NJ), Chairman of the Subcommittee, criticized the SEC’s process at arriving at their proposals, he seemed pleased that the current proposal seems more thoughtful and does not include a capital buffer.

Click here for the Committee staff’s memorandum.


A September 13, 2013, regulatory filing by Toyota Motor Credit Corp. (Toyota) indicated that the Consumer Financial Protection Bureau (CFPB) and the Department of Justice (Justice) are examining the lending arms of major auto manufacturers for possible discrimination in lending, that the CFPB and Justice sought information from Toyota "and other auto finance providers" about pricing practices for loans that the company funds for auto dealers. American Honda Finance Corp., a unit of Honda Motor Co., reported the same request, and added that enforcement action is possible.

In March, the CFPB cautioned banks under its supervision that they face enforcement action if they fund discriminatory vehicle loans that are made by dealers. The warning drew extensive criticism from auto dealers, which were explicitly carved out of the Dodd-Frank Act that created CFPB.

The CFPB and Justice have sought data about a practice the agency refers to as "dealer markup" and auto dealers call "dealer participation" or "dealer-assisted finance." Under this system, lenders -- banks or finance companies -- work indirectly by allowing dealers to add to the interest rate the lenders charge and pocket the difference. Consumer groups charge that the practice gives dealers an incentive to move buyers into pricier loans. Dealers contend that the markup is a reasonable price for their services, which include arranging financing and handling paperwork, and that buyers can negotiate the spread.


In September 2013, the New York Fed published a paper: “The Fragility of Short-Term Secured Funding Markets.” In the paper, the authors noted that “an important result of [the] paper is that securitization (net asset sales) weakens a borrower’s balance sheet because it reduces the assets available to raise cash in case of emergency, either through liquidation or additional secured short-term borrowing. The model therefore predicts that borrowers that securitize less will be less fragile.”

Click here for the paper.



Residential Mortgage Roundtable – October 16, 2013, New York City, New York, 2pm – 6pm. Further details to follow.

Fall Symposium – October 29, 2013, New York City, New York, 5pm – 8pm. The Symposium will be followed by a cocktail party. The event is open to both members and non-members. The event will be held at the offices of Cadwalader, Wickersham & Taft, One World Financial Center, New York City, New York.

ABS Vegas 2014 – January 21-24, Las Vegas, Nevada. Click here for more information.

SFIG is now accepting sponsorship contracts for this conference. If you are interested, please contact SFIG.



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.


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