Credit Risk Transfer: Making a Successful Program Even Better

On February 10, Howard Altarescu participated in the Urban Institute / CoreLogic Sunset Seminar, “Credit Risk Transfer: Making a Successful Program Even Better.” The presentation outlined the importance of credit risk transfers (CRT), especially as risk transfers on newly acquired single-family mortgages continues to expand, and also featured speakers from Andrew Davidson & Co., Two Harbors Investment Corp., Genworth U.S. Mortgage Insurance, Urban Institute and CoreLogic.

Howard focused on the legal considerations surrounding the Investment Company Act of 1940 and relevant Real Estate Investment Trust (REIT) tax legislation, contending that while these rules limit Mortgage REIT (mREIT) investment in CRT securities, existing bipartisan support for mREIT participation could result in propitious legislative amendments.

To view the presentation slides in full, please click here.

Rating Agency Developments

On December 15, Fitch updated its bank regulatory capital criteria.  Fitch Release.

On December 15, Fitch updated its hybrid equity rating criteria for the non-financial corporate and REIT sectors.  Fitch Release.

On December 15, DBRS published its master European RMBS rating methodology and jurisdictional addenda.  DBRS Release.

On December 14, S&P requested comment on its proposed methodology for rating obligations secured by future U.S. federal cash flows.  Comments must be submitted by January 17, 2012.  S&P Release.

On December 14, Fitch updated its criteria for rating prerefunded U.S. municipal bondsFitch Release.

On December 13, Fitch updated its corporate governance criteria.  Fitch Release.

On December 12, Fitch updated its insurance broker rating criteria report.  Fitch Release.

On December 12, Fitch updated its criteria for finance and leasing companiesFitch Release.  Fitch Report.

On December 9, Moody’s released its approach to rating transactions backed by structured settlementsMoody’s Methodology.

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

Defendant’s Motion to Dismiss Granted in KKR Class Action

On November 17, 2010, Judge Paul A. Crotty of the United States District Court for the Southern District of New York granted in its entirety the Defendant’s motion to dismiss in a securities class action brought against KKR Financial Holdings LLC, a REIT heavily invested in RMBS. Plaintiffs alleged that KKR had not sufficiently disclosed in its April 2007 registration statement the degree of risk associated with the leverage in its portfolio. The Court found that the allegations were “conclusory, based on hindsight,” that the registration statement clearly disclosed the risks associated with KKR’s financing, and that KKR was under no obligation to provide dollar estimates of potential future losses. Decision.