Rating Agency Updates

On September 21, Moody’s released a report explaining its views on legal risk in structured finance ratings. Moody’s Release.

On September 17, S&P proposed criteria for evaluating counterparty risk for funds with principal stability fund ratings and fund credit quality ratings, including the use of repos. Comments are requested by October 18.  S&P.

On September 17, Fitch updated its global rating criteria for cash flow analysis of CDOs. Fitch Release. Fitch Report.

On September 22, Moody’s published a rating methodology to explain its approach in analyzing the intrinsic financial strength of English housing associations. Moody’s Release.

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

HUD Announces New Reverse Mortgage Option

On September 22, the FHA announced that a modified version of its Home Equity Conversion Mortgage product will be available as of October 4. The option, known as HECM Saver, will allow homeowners who want to borrow a smaller amount than what would be available with an original HECM Standard to pay lower upfront closing costs. The mortgage insurance premium for both the HECM Saver and HECM Standard will be charged monthly at an annual rate of 1.25% of the outstanding loan balance, increased from 0.50% in effect for current HECM Standards. In addition, the amount of HECM loan proceeds available to both HECM Saver and HECM Standard borrowers will be reduced. HUD Release.

New Structure for European Financial Supervision

On September 22, the European Parliament approved a new structure for financial supervision. Three European Supervisory Authorities are established with broader powers than the current supervisory committees they replace, including the power to settle disputes among national financial supervisors and to impose temporary bans on risky financial products and activities. A European Systemic Risk Board is also established to monitor and warn about the general build-up of risk in the EU economy. Press Release.

HAMP Update on New Dodd-Frank Certification Requirement

On September 21, Treasury and HUD issued a supplemental directive providing guidance on a new borrower certification for non-GSE loans included in the Making Home Affordable Program, as required under the Dodd-Frank Act. A servicer must now obtain a certification from a borrower that the borrower has not been convicted within the last ten years of: (i) felony larceny, theft, fraud or forgery, (ii) money laundering, or (iii) tax evasion in connection with a mortgage or real estate transaction.  HAMP Update.  Supplemental Directive.

CFTC Implementation of Swap Regulations under Dodd-Frank

On September 16, CFTC Chairman Gary Gensler provided an update on the CFTC’s efforts to implement the Dodd-Frank Act for regulation of the swap marketplace. Chairman Gensler addressed four broad areas: (i) regulating the dealers, (ii) requiring standardized swaps to trade on exchanges or execution facilities, (iii) requiring that standardized derivatives be cleared through central clearinghouses, and (iv) a new registration category called swap data repositories. CFTC Release.

SEC Proposes Measures to Address Short Term Borrowing Disclosure

On September 17, the SEC proposed measures to require public companies to disclose additional information about their short-term borrowing arrangements to enable investors to better understand whether amounts reported at the end of reporting periods are consistent with amounts outstanding throughout the reporting periods. SEC Release. Proposed Rule.

House Hearing on GSEs and Housing Finance Reform

On September 15, the Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises of the House Financial Services Committee held a hearing on the status of Fannie Mae and Freddie Mac and with respect to housing finance reform. Treasury Assistant Secretary for Financial Institutions Michael S. Barr confirmed the Administration’s commitment to delivering a comprehensive proposal for reform of Fannie Mae, Freddie Mac, and the broader housing finance system to Congress by January 2011.
Edward J. DeMarco, Acting Director of the FHFA also called for legislation to restructure and strengthen the nation’s housing finance system and to resolve the Fannie Mae and Freddie Mac conservatorships. Both emphasized the importance of a transition period to avoid further disruptions in the housing finance system that could occur if the GSEs were to suddenly exit the market.

Senate Hearing on Covered Bonds

On September 15, the Senate Committee on Banking, Housing and Urban Affairs held a hearing on the potential uses of and regulatory issues concerning covered bonds. Witnesses testifying included Honorable Scott Garrett, New Jersey, Julie L. Williams, First Senior Deputy Comptroller and Chief Counsel, OCC, Michael H. Krimminger, Deputy to the Chairman, FDIC, Scott A. Stengel, Partner, Orrick, Herrington & Sutcliffe LLP, on behalf of the U.S. Covered Bond Council, Securities Industry and Financial Markets Association, Kenneth A. Snowden, Professor, University of North Carolina at Greensboro, and Ric Campo, CEO, Camden Property Trust, on behalf of National Multi-Housing Council. Senate Testimony. Proposed Bill.  Hearing Webcast.