Month: August 2010

Rating Agency Updates

On August 24, Fitch released its revised criteria for rating Trust Preferred CDOs. Fitch Release.

On August 25, Moody’s released its methodology on evaluating the credit quality of U.S. municipal pool programs. Moody’s Methodology.

On August 24, DBRS released its methodology for Canadian structured finance flow-through ratings. DBRS Methodology.

Note: Free registration is required for Fitch and Moody’s releases and reports.

ISDA Streamlines Credit Derivative Novation Process

On August 25, ISDA published ‘Additional Provisions for Consent to, Confirmation of, Transfer by Novation of OTC Derivative Transactions’. The provisions amend the novation protocol and provide for further streamlining of the process for novating or assigning credit derivative trades as part of ISDA’s ‘Credit Consent Equals Confirmation Project’. The project goes live on September 30. ISDA Release.

ISDA Publishes HIRE Act Protocol

On August 23, ISDA published the 2010 HIRE Act Protocol, which addresses the changes in law effected by the HIRE Act, enacted on March 18.  The HIRE Act could impose U.S. withholding tax on payments under an equity swap that are determined in part based on dividend payments on a referenced U.S. equity security.  The HIRE Act provisions generally are effective on any swap after September 14, regardless of when the swap was entered into.  The protocol (i) eliminates the normal gross-up that would apply for withholding tax purposes, (ii) allows for termination of a swap if payments become subject to withholding under the HIRE Act provisions, and (iii) amends payee representations to account for the HIRE Act. ISDA Release.

See Orrick’s Financial Markets Alert of April 1, 2010 for additional background regarding the HIRE Act.

Fed Neighborhood Stabilization Summit

On August 26, the Fed announced plans to sponsor a national summit on September 1 and 2 to discuss methods and resources for encouraging neighborhood stabilization in the aftermath of the U.S. home mortgage foreclosure crisis. The summit will examine strategies that lenders, local and regional governments, federal officials, and nonprofit organizations can use to mitigate the impact of vacant and REO property. The Fed will also use this summit to showcase its research findings and policy efforts, including the release of the publication “REO and Vacant Properties: Strategies for Neighborhood Stabilization”. Fed Release.

MSRB Request For Comment on Underwriting Activities of Financial Advisors

On August 17, the Municipal Securities Rulemaking Board issued a request for comment on draft amendments to Rule G-23, which would prohibit any broker, deal or municipal securities dealer acting as a financial advisor to an issuer in connection with a new issue of municipal securities from also acting as underwriter for such issuance.  The MSRB has included a list of topics on which comments are sought.  Comments are requested no later than September 30. MSRB Request for Comment

FFIEC Releases Guidance on Reverse Mortgages

On, August 16,  the Federal Financial Institutions Examination Council (FFIEC) released guidance on reverse mortgages.  The guidance addresses the general features of reverse mortgage products as well as relevant legal requirements and consumer protection concerns related to reverse mortgages.  It also addresses related policies, procedures, internal controls, and third-party risk management. FFIEC Press Release.

SEC/CFTC ANPR: Dodd-Frank Act, Title VII Definitions

On August 13, the Fed and the CFTC issued an advance notice of proposed rulemaking to solicit comments on how to define key terms in connection with swaps and security-based swaps and as to regulations to be prescribed regarding “mixed swaps”, as required under Section VII of the Dodd-Frank Act.  Comments must be received no later than 30 days after publication of the ANPR in the Federal Register. ANPR.

IRS Publishes Guidance on Real Property Lien Releases by REMICs

On August 17th, the IRS published Revenue Procedure 2010-30, which responds to various requests for relief made by CMBS market participants in response to final regulations issued by the IRS on September 16, 2009. The final regulations introduced a new “principally secured” requirement for the REMIC rules relating to lien releases. Under the new revenue procedure, if a release of a lien on an interest in real property that secures a mortgage loan held by a REMIC satisfies certain requirements, then the IRS will not challenge the mortgage loan’s status as a “qualified mortgage” on the grounds that it fails to be principally secured by an interest in real property. A lien release effected by a “grandfathered transaction” or by a “qualified pay-down transaction” generally will qualify for the benefits of the revenue procedure. Revenue Procedure 2010-30.

See our Financial Industry Week in Review of September 18, 2009 for additional background regarding the September 16, 2009, final regulations