September 3, 2014 Newsletter
September 3, 2014

SFIG News

SFIG Calendar

Advocacy Outlook

Industry News Highlights

Upcoming Events in Washington

 
SFIG NEWS
APPROXIMATELY 700 INDUSTRY PARTICIPANTS JOIN SFIG FOR REGULATION AB II CALL

On September 2nd, SFIG held duplicate calls, with nearly 700 people attending, to walk through the key points of the Regulation AB II rules. Given the unparalleled industry interest in this topic, SFIG opened the calls to both members and non-members.

On August 27th, the U.S. Securities and Exchange Commission (“SEC”) unanimously adopted rules revising the disclosure, reporting, and offering process for asset-backed securities and released a press release and fact sheet regarding the final rule. SFIG’s high-level summary of the final rule can be found here and in-depth review can be found here, both of which were prepared by Stephen S. Kudenholdt, Partner, Dentons.

Additional member calls may be held at the Regulation AB II Task Force level or within individual asset class committees. If you are interested in joining SFIG’s Regulation AB II Task Force or to listen to the September 2nd call recordings, please contact Alyssa Acevedo at Alyssa.Acevedo@SFIndustry.org.

SFIG would like to provide one last gentle reminder to please complete our Regulation AB II survey. Understanding where our members stand across a wide range of Regulation AB II issues will help us to be most effective when considering potential future advocacy.

 
 
CFPB PROVIDES SEC FAVORABLE REGULATION AB II GUIDANCE UNDER THE FAIR CREDIT REPORTING ACT

Immediately prior to releasing the Regulation AB II rules, the Securities and Exchange Commission (“SEC”) obtained a letter from the Consumer Financial Protection Bureau (“CFPB”), providing favorable guidance under the Fair Credit Reporting Act (“FCRA”).  The Adopting Release indicates that the letter confirms that (i) issuers and the SEC will not be “consumer reporting agencies” by releasing the data, and (ii) Section 604(f) of the FCRA will not be violated if the data (such as a credit score) is a consumer report; provided in each case that the SEC “determines that disclosure of the information is necessary for investors to independently perform due diligence and that the information should be filed with the Commission and disclosed on EDGAR to best fulfill a Congressional mandate.” The Adopting Release itself evidences that the SEC has made this required determination.

SFIG very much appreciates the FCRA guidance provided by the CFPB and the SEC. SFIG had raised concerns regarding potential FCRA liability in meetings with both the SEC and the CFPB during the February 2014 Reproposal comment period. We will seek additional guidance from the SEC and CFPB that providing data that is now considered industry practice, but not necessarily required by Regulation AB II, will not invoke FCRA liability.

Members who are interested in learning more about SFIG’s advocacy on Regulation AB II should please contact Alyssa.Acevedo@sfindustry.org.

 
 
SFIG TO RESPOND TO FINAL LCR RULE

The Federal Reserve Board and the Federal Deposit Insurance Commission (“FDIC”) today approved final rules to implement the Liquidity Coverage Ratio (“LCR”) in the U.S. as established by the Basel Committee on Banking Supervision. The FDIC also approved the Supplementary Leverage Ratio, which has yet to be published. In January, SFIG responded to the Notice of Proposed Rulemaking on the LCR and has continued to engage members in anticipation of the release of the Final Rule.

SFIG will hold a call on Thursday, September 11th at 2:00 p.m. (EST) to review the details of the Final Rule with the Regulatory Capital and Liquidity Committee. To join this Committee and participate in the call, please email Mary.Robinson@sfindustry.org.

 
 
SFIG TO RESPOND TO PROPOSAL ON MARGIN AND CAPITAL REQUIREMENTS FOR COVERED SWAP ENTITIES

The Federal Reserve Board and the Federal Deposit Insurance Company approved a proposal to establish margin and capital requirements for covered swap entities. In June, SFIG submitted a comment letter advocating for asset-backed securities issuers to qualify for the “low-risk financial end user” designation proposed by the prudential regulators in their original proposal. SFIG will be commenting on this new proposal. Members who are interested in joining the Derivatives in Securitization Task Force should email Alyssa.Acevedo@sfindustry.org

 
 
SFIG CALENDAR
CREDIT RATING REFORM TASK FORCE CONFERENCE CALL 

TBD

 
 
RESIDENTIAL MORTGAGE COMMITTEE CALL ON RMBS 3.0 PROCESS

THURSDAY, September 4, 2014
3:00 p.m. – 4:00 p.m. (EST)

 
 
REGULATORY CAPITAL AND LIQUIDITY COMMITTEE CALL ON LCR RULE

THURSDAY, September 11, 2014
2:00 p.m. – 3:00 p.m. (EST)

 
 
CHINESE MARKET COMMITTEE CALL

THURSDAY, September 12, 2014
9:00 a.m. – 10:00 a.m. (EST)

 
 
IMN ABS EAST 2014 CONFERENCE (SFIG—LEAD ASSOCIATION PARTNER)

SUNDAY, September 21, 2014 – TUESDAY, September 23, 2014
The Fontainebleau Hotel
Miami Beach, FL
Registration available here

 
 
SFIG FALL SYMPOSIUM

TUESDAY, October 21, 2014
6:00 p.m. – 9:00 p.m. (EST)
Ernst & Young
5 Times Square
New York, NY  10036
Registration and 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

 
 
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.

 
 
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.

 
 
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 build upon the momentum of its recent release of its First Edition RMBS 3.0 Green Papers, and the submission of a response to Treasury’s request for input on Private Label Securities. The Task Force is finalizing an agenda for its Second Edition Green Papers and will continue 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 is finalizing its response to the FHFA’s request for input on guarantee fees and will next comment on FHFA’s proposed structure for a single agency security and Strategic Plan for the Conservatorships of Fannie Mae and Freddie Mac. The Task Force previously reviewed the Johnson-Crapo proposal, with SFIG staff summarizing its recommendations in a briefing book on the legislation. SFIG has also reviewed the House Republicans’ proposal for GSE Reform, 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 in conjunction with membership 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. 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, with proposed questions and answers reviewed by the task force via survey. If your institution intends to provide a response to the survey, please do so as soon as possible. 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 is launching its Chinese Market Committee and will be holding the first full committee call on September 12th. The agenda for this call includes: an introduction of the co-chairs, 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 held a call to walk through the key points of the Regulation AB II rules on Tuesday, September 2nd. Additional member calls may be held at the Regulation AB II Task Force level or within individual asset class committees. SFIG members who are interested in joining this task force or who have any questions 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 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 the prudential regulators in their original proposal. SFIG members who are interested in learning more about this initiative should email Alyssa.Acevedo@sfindustry.org.

SFIG’s Credit Rating Reform Task Force will reconvene next week via conference call to discuss the Securities and Exchange Commission’s recent Final Rules for nationally recognized statistical rating organizations, which were approved August 27th. The conference call will take place on Thursday, September 4th at 10:00 a.m. (EST) and members interested in participating should contact Amanda.Bateman@sfindustry.org.

The Money Market Funds 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 acomment letter in September of 2013 on Money Market Fund Reform. If you are interested in joining this working group, please contact Alyssa.Acevedo@sfindustry.org.

 
 
INDUSTRY NEWS HIGHLIGHTS
SECOND QUARTER DROP IN AGENCY MBS HOLDINGS

During the second quarter mortgage backed securities (“MBS”) holdings declined for the top 50 banks by assets in hold-to-maturity and available-for-sale portfolios, according to consolidated financial statements reviewed by the National Information Center. According to a client note from Barclays “[m]ost of the decline came in conventional agency MBS, which fell by $4.2 billion.” Agency debt holdings fell by almost 9 billion over the last quarter. Non-agency MBS holdings of the top 50 banks also fell by $4.4 billion. 

Commercial MBS holdings rose $7.4 billion during the second quarter, and Treasury holdings also increased by $48 billion. Bank portfolio allocation to securities increased by almost $70 billion during the second quarter, according to the client note.

 
 
REPORT INDICATES 2.5 MILLION HELOC BORROWERS MAY FACE PAYMENT SHOCK

According to Mortgage Monitor Report, at least 2.5 million borrowers will face an increase of $250 per month on their monthly mortgage payment due to the imminent reset in home equity lines of credits (“HELOCs”) over the next three years as loans begin to amortize.  Typically, HELOCs have an initial interest-only period for a period of time and subsequently payments increase to pay principal and interest. Borrowers whose HELOCs will reset over the next three years are utilizing just under 60 percent of their available credit. If these borrowers utilize more of their credit they could face even more payment shock. 

 
 
CFPB EXPECTED TO RELEASE PROPOSED RULE AT AUTO FINANCE FIELD HEARING ON SEPTEMBER 18th

The Consumer Financial Protection Bureau (“CFPB”) announced that it will be holding an auto finance field hearing on September 18th in Indianapolis. Many industry experts believe that the CFPB is likely to release a proposed rule that would designate auto lenders as larger participants at this hearing, given the timing of the event.

The CFPB’s larger participant rulemaking currently only covers debt collectors with $10 million or more in annual collections. It is expected that the CFPB will add on both manufacturer captives and larger nonbanks to their participant rulemaking, placing them directly under the agency’s supervision.

The hearing will feature remarks from Director Richard Cordray, as well as testimony from consumer groups and industry representatives. The meeting is open to the public and a live webcast will be made available.

 
 
RICHARD SHELBY MAY RESUME ROLE ON SENATE BANKING PANEL

Senator Richard Shelby (R-Al) is expected to resume his role as Chairman of the Senate Committee on Banking, Housing, and Urban Affairs in January if Republicans take control of the Senate.

Shelby previously served as Chairman from 2003 to 2007 and many industry experts believe that he is likely to renew his focus on the implementation and oversight of the Dodd-Frank Act, including concerns with the structure and activities of the Consumer Financial Protection Bureau.

There is also the possibility that the Senator will tackle housing finance reform, given his role in the negotiations leading up to the 2008 housing law that created new regulators for the government-sponsored enterprises.

Richard Shelby has two years left under party rules to head the Committee, and his six-year term limit for serving as Ranking Member on the panel expired in 2010.

 
 
FHFA PROPOSES MODIFIED REQUIREMENTS FOR FHLB MEMBERSHIP

The Federal Housing Finance Agency (“FHFA”) proposed rules yesterday that would modify the eligibility requirements for financial institutions to apply for and retain membership in the Federal Home Loan Bank (“FHLB”) System. According to the FHFA’s press release announcing the proposal, the new rules would:

  • Establish quantitative testing that would require members to hold one percent of their assets in home mortgage loans on an ongoing basis;
  • Subject certain members to a 10 percent residential mortgage loans requirement on an ongoing basis, including after their approval as FHLB members;
  • Define “insurance company” to mean a company that has as its primary business the underwriting of insurance for nonaffiliated persons; and,
  • Clarify the standards defining what constitutes an insurance company’s “principal place of business” for purposes of membership.

The revisions to the definition of insurance company would effectively ban captive insurers from membership in the FHLB and prevent entities from gaining access to benefits through a captive. Captives which have been previously granted membership prior to the moratorium on their admissions would be “sunset” over five years with defined limits on advances.

 
 
FSOC TO MEET ON SEPTEMBER 4TH

Last Thursday, the U.S. Treasury Department announced that the U.S. systemic risk council, the Financial Stability Oversight Council (“FSOC”), will be meeting on September 4th in order to discuss naming nonbank financial firms for tougher regulatory oversight. Such a tag means the firms will be regulated more like U.S. banks and will come under scrutiny from the Federal Reserve.

The FSOC did not mention which firms are under consideration but appears close to deciding whether it believes certain insurers are systemically risky, according to a recent Reuters article. The council is also expected to discuss its research regarding asset managers to determine if they pose systemic risk and they will hear an update on banks’ plans for how they could file for bankruptcy protection rather than be bailed out during a crisis.

 
 
POSSIBLE TIMELINES AND REGULATORY ACTIONS FOR THE REVIVAL OF ABS IN THE EU

According to a recent Reuter’s article, European regulators and bankers believe that the revival of the country’s repackaged debt market to fund economic recovery will take years and depend on a re-invention of the sector instead of quick regulatory tweaks. 

The European Central Bank (“ECB”) has encouraged market expectations, stating that it could buy securitized debt within months. ECB executive board member Benoit Coeure added that the state may have to provide some kind of guarantee to the market.

According to Insurance Europe, ABS makes up only about 1 percent of insurer holdings and capital charges planned by European insurance regulators remain enormous compared with historical default rates for the products.

Greg Medcraft, Chairman of the International Organisation of Securities Commissions (“IOSCO”), said that simply scaling back capital charges is not a silver bullet for a lasting revival that will take time to put in place.

"We have got to think a bit more holistically than that," Medcraft told Reuters. "A focus on capital charges is probably the old world. The new world needs to be focused more on how do we build a sustainable market."

European Union finance ministers are scheduled to meet on September 13 in Milan, Italy to discuss rekindling securitisation after issuance in Europe sank to 181 billion euros last year.

 
 
UPCOMING EVENTS IN WASHINGTON
CFPB AUTO FINANCE FIELD HEARING
THURSDAY, September 18, 2014
11:00 a.m. (EST)
Indianapolis, IN
Additional details available here
 
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
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.
Registration is available here
 
SENATE BANKING COMMITTEE HEARING ON “WALL STREET REFORM: ASSESSING AND ENHANCING THE FINANCIAL REGULATORY SYSTEM”
TUESDAY, September 9, 2014
10:00 a.m. – 12:00 p.m. (EST)
The witnesses will be: The Honorable Daniel K. Tarullo, Governor, Board of Governors of the Federal Reserve System; The Honorable Martin J. Gruenberg, Chairman, Federal Deposit Insurance Corporation; The Honorable Thomas J. Curry, Comptroller of the Currency; Office of the Comptroller of the Currency; The Honorable Richard Cordray, Director, Consumer Financial Protection Bureau; The Honorable Mary Jo White, Chair, U.S. Securities and Exchange Commission; and The Honorable Timothy G. Massad, Chairman, U.S. Commodity Futures Trading Commission.
Webcast available here
 

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 Senior Policy Analyst

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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