On May 6, the FHFA announced that it is directing Fannie Mae and Freddie Mac to limit future mortgage acquisitions to loans that fall under the requirements for a qualified mortgage. Starting on January 10, 2014, Fannie and Freddie will no longer be able to purchase a mortgage loan that is subject to the “ability to repay” requirements under the Dodd-Frank Act if the loan: (i) is not fully amortizing; (ii) has a term of longer than 30 years; or (iii) includes points and fees in excess of 3% of the total loan amount (or such other limits for low balance loans as set forth in the rule). FHFA Release. Fannie Mae Letter. Freddie Mac Letter.
On May 1, the SEC proposed rules and interpretive guidance for parties to cross-border security-based swap transactions. Comments on the proposed rules must be submitted within 60 days of publication in the Federal Register. SEC Release and Fact Sheet.
On April 30, the FSOC released its 2013 annual report required pursuant to the Dodd-Frank Act. The report focuses on seven key themes: (i) vulnerability to runs in wholesale funding markets that can lead to destabilizing fire sales; (ii) the reliance of the housing finance system on government and agency guarantees; (iii) operational risks; (iv) reliance on reference interest rates, including LIBOR; (v) resilience to interest rate risk; (vi) long-term fiscal imbalances; and (vii) U.S. sensitivity to possible adverse developments in foreign countries. FSOC Report.
On April 30, the FHFA issued its progress report on the steps being taken to establish a common securitization infrastructure for MBS. The FHFA is encouraging interested parties to provide written input on the progress report, and input must be received by June 30. FHFA Release. FHFA Project Report.
On April 25, the legal affairs committee of the European Parliament toned down plans to reform the European auditing market in a move which will provide some relief to the “Big Four” auditors who would have been most affected.
The committee rejected the original draft bill from the European Commission, which called for compulsory audit firm rotation every six years, and suggested instead that the rotation should take place every 25 years. The committee also rejected the Commission’s proposal of caps on auditor market share, which could have split up the “Big Four.”
The reforms, which were initiated after the perceived failure of the auditors in recognizing the risks building up in banks before the financial crisis, will now be negotiated between member states before adoption by the full European Parliament. Press Release.
On April 23, the SEC announced the agency for its Credit Ratings Roundtable which will be held on May 14. The roundtable will consist of three panels: (i) the potential creation of a credit rating assignment system for ABS; (ii) the effectiveness of the SEC’s current system to encourage unsolicited ratings of ABS; and (iii) alternatives to the current issuer-pay business model in which the issuer selects and pays the rating agency. Comments may be submitted prior to the event through the SEC website. SEC Release.
On April 19, the CFPB released proposed rule amendments to the ability to repay/qualified mortgage (QM) rules. The proposals address: (i) clearer rules for determining DTI; (ii) confirmation regarding loans meeting eligibility requirements; (iii) that certain GSE or agency requirements do not impact the determination of QM status; (iv) that there is no field preemption under Regulation X; and (v) which mortgage loans to consider in determining whether a servicer qualifies as a ‘small servicer.’ Comments on the proposed amendments must be received within 30 days of publication in the Federal Register. CFPB Release. Proposed Rules.
On April 15, the FDIC and the Fed issued a joint release which provides additional guidance, clarification and direction for the first group of 11 institutions filing their resolution plans pursuant to the Dodd-Frank Act. Separate guidance was issued for domestic and foreign-based institutions. Joint Release. Domestic Guidance. Foreign-Based Guidance.