Month: April 2010

House Committee Hearing on Housing Finance System

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On April 14, the House Committee on Financial Services held a hearing titled “Housing Finance-What Should the New System Be Able to Do?: Part II-Government and Stakeholder Perspectives”.  Among those providing testimony was Shaun Donovan, Secretary of the U.S. Department of Housing and Urban Development, and Anthony “Tuck” Reed, Executive Vice President of Capital Markets at SunTrust Mortgage, Inc., testifying on behalf of the Housing Policy Council of The Financial Services Roundtable.  Full Hearing Testimony.

Secretary Donovan’s testimony outlined the objectives that the Administration believes should be achieved by a stable and well-functioning housing finance market, including widely available mortgage credit, housing affordability, consumer protection, and financial stability through distribution of the credit and interest rate risk that results from mortgage lending. The Secretary went on to say that the Administration believes that any system that achieves these goals should be characterized by alignment of incentives for all actors, avoidance of privatized gains funded by public losses, strong regulation, standardization of mortgage products (with “room for innovations to develop new products”), support for affordable single-and multifamily-housing, a diversified investor base and sources of funding through securitization and other forms of intermediation, accurate and transparent pricing, secondary market liquidity, and clear mandates.  Secretary Donovan’s Testimony.

Mr. Reed’s testimony included a description of the Housing Policy Council’s proposal to revitalize the secondary mortgage market for conventional mortgage loans with the objectives of ensuring a steady flow of reasonably priced housing finance for borrowers without disrupting the economic recovery, minimizing risk to taxpayers, and ensuring a flow of funding to contribute to affordable housing. The Housing Policy Council proposal relies on private capital, a clear delineation of the roles of the private sector and the Federal Government in the securitization process, and the transfer of a stream of funding to affordable housing, all accompanied by strong federal regulation and oversight. Mr. Reed’s Testimony.

SEC Proposes Revisions to Reg AB

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On April 7, the SEC unanimously approved the publication of proposals to significantly revise Regulation AB and related rules. The proposals relate to, among other things, the offering process, disclosure, and reporting for asset-backed securities.  Comments are requested within 90 days of publication of the proposals in the Federal Register.  Proposed Rule.  Client Alert.

Rating Agency Developments

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On March 26, Fitch issued updated rating criteria for Market Value Structures.  Fitch Release.

On March 31, Fitch released its updated criteria for rating global aircraft operating lease ABS.  Fitch Release.

On March 30, Moody’s requested comments on proposed changes to the way in which it treats hybrid securities when including them in the debt-to-equity and, in some cases, coverage ratios of the companies it rates.  Comments should be sent to Moody’s by April 23.  Moody’s Release.

On March 30, S&P refined its methodology for assessing an insurer’s risk appetite framework.  S&P Release.

Note: Free registration is required for Moody’s, S&P and Fitch releases and reports.

Proposed Mortgage Servicing Conflict Legislation

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On March 25, Representatives Miller and Ellison introduced the Mortgage Servicing Conflict Elimination Act which, if passed, would prohibit mortgage servicers and their affiliates from owning or holding an interest in a second mortgage on residential properties which are secured by first mortgages that they service.  Proposed Legislation.

Release of Additional Information on Maiden Lane Portfolios

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On March 31, the New York Fed announced that it has expanded the information made available to the public about the Maiden Lane portfolios. The new information is related to all of the holdings of Maiden Lane LLC (ML) other than residential whole loans, and all of the holdings of Maiden Lane II LLC (ML II) and Maiden Lane III LLC (ML III). The additional information includes the CUSIP number, descriptor, and the current principal balance or notional amount outstanding for all positions in the Maiden Lane portfolios. ML was formed to facilitate the merger of Bear Stearns and JPMorgan, and ML II and ML III were formed to facilitate the restructuring of the government’s financial support to AIG.  New York Fed Release.