Sign up today and take advantage of member-only content — the kind of timely, cutting edge industry insight that only Structured Finance News can deliver.
  • Asset Securitization Report one-month trial subscription
  • StructuredFinanceNews.com one-month trial subscription
  • Free e-newsletters
  • Free whitepapers

July 6, 2009

 Past Issues

Column

Financial Reform Legislation and Its Alternatives

The package of financial regulatory reforms recently proposed by the Obama administration includes a proposal for a Consumer Financial Protection Agency. According to the document, the agency would '...protect consumers across the financial sector from unfair, deceptive and abusive practices.' While this proposal is likely to generate strong opposition from the financial community, the events of the past few years make some form of regulation inevitable. However, stronger regulation of the financial sector, including consumer finance, should be accomplished through the legislative process. An example of how disruptive bad policies and regulations can be is the recently enacted Home Valuation Code of Conduct, or HVCC. It is an initiative developed by New York's Attorney General Andrew Cuomo, resulting from his investigation into questionable appraisal practices. The Code is designed to insulate appraisers from pressure to inflate the estimated value of properties on which loans are being made. HVCC prohibits any entity paid on commission (mainly brokers) and lenders' loan production staff from communicating directly with appraisers. In most cases, appraisals must be directed to independent entities ('Appraisal Management Companies' or AMCs), which effectively subcontract the work to affiliated appraisers.

ABS

A Lesson in Unintended Consequences

Excess is what brought about this financial crisis. The only way to curb the intemperance is through increased regulation. Right or wrong? This is the question that this month's issue of ASR grapples with. It appears that the answer is not so clear cut. Various proposals from the government, ranging from accounting rules to financial reform legislation, may have the best of intentions, but they also carry with them a host of potential new problems. A case in point - in this month's cover story, Nora Colomer examines the Obama administration's proposals on securitization, contained in a white paper released on June 17. These propositions for reform - the most prominent of which is a rule requiring originators to retain 5% of their securitized deals - provide a solid platform for securitization, and yet, as Nora asserts, they also increase the cost of capital and threaten the ability of firms to recycle credit, defeating the very purpose that securitization serves.

Regulation Proposals Say More of the Same

The Obama administration set out a white paper recommending far-reaching changes in the regulation of OTC derivatives, but the proposals did not bring anything new to the table. Industry players said that the derivatives' aspects are largely the same terms announced by Secretary Timothy Geithner on May 13.

FASB Rule Casts Shadow over Securitizations

Nascent signs of economic recovery bode well for the commercial real estate sector, which lags the economy, but the ongoing correction in the sector is not yet done. Not only that, any commercial real estate recovery in the next year or two may be tempered by an accounting regulation that will take effect in January and impact all sorts of securitization avenues.

New FASB Rules Present Accounting Challenges

As the dog days of summer approach, securitization market players are facing some of the biggest accounting changes in years that will require major changes in relatively short order to their balance sheets, financial disclosures and the systems to generate that information. The Financial Accounting Standards Board (FASB), based in Norwalk, Conn., published June 12 two standards affecting securitizations: Financial Accounting Statements (FAS) No. 166, Accounting for Transfers of Financial Assets, and FAS 167, Amendments to FASB Interpretation No. 46(R). Effective for first-quarter financial statements, firms must implement new disclosures and bring most securitizations onto their balance sheets, a move market participants fear could prompt regulators to impose more intensive capital requirements.

New Regulations Shed Clarity on the Future of Securitization

The Obama administration unleashed its new proposal to regulate the securitization market last month. This forward-looking, positive step sends the message that securitization is worth saving. However, not only do these regulations potentially make credit more expensive, they also increase the cost of capital and threaten the viability of securitization.

MBS

Mortgage Debt: Investing In An Era of Loan Modifications

Navigating the mortgage debt markets can be tricky in good times, but market participants may find today's market conditions more akin to walking through a minefield. Home prices continue to decline nationwide and various reports suggest that the number of problem loans has grown, expanding beyond just subprime mortgages.

UniCredit Deal Reopens Italian Covered Bond Sector

This month, UniCredit launched its inaugural OBG (Obbligazioni Bancarie Garantite) benchmark. The transaction, which reopens the Italian covered bond market, was met with very strong interest from the international investor community, sources at the bank said. The issue is part of the €20 billion ($28 billion) program published in 2008 and based on a portfolio composed of 100% residential mortgages.

CMBS: To TALF or Not Is the Question

The first round of CMBS TALF saw no takers. However, the lackluster reception isn't indicative of a lack of appetite. Market sources said it's just a matter of dealing with a more complex asset class that has required more work and, consequently, will take more time to gather momentum under the Federal Reserve program. 'The program is very well developed, and the Fed has spent lots of time on it, but there are still some issues that need to be worked out,' a CMBS expert said. Issues like aggregate risk and hedging risk make the finalization of the program challenging.'

Global

The OECD and Its Take on Offshore Tax Havens

The Organization for Economic Cooperation and Development (OECD) continues to work on its list of acceptable tax havens. While countries are looking to get off the 'grey list,' industry players said that the impact of status could affect business for those countries unable to comply with the guidelines.

Dutch Bank FMO Talks Emerging Markets

Q&A Until a few weeks ago, it seemed that Dutch development bank FMO had joined the trickle of players out of emerging market ABS.

Vindicating DPRs, KKB and BTA Pay Down

In what is being widely viewed as a vindication of the DPR product, stressed programs originated by Kazkommertsbank and BTA Bank have fully paid down. 'It shows that the structure works in a highly distressed scenario,' said a market source that has done business in Kazakhstan.

ABS Totals

ABS Totals

View the year-to-date ABS issuance totals for ABS, MBS and CMBS.

ABS Manager Rankings

ABS Manager Rankings

View the year-to-date manager rankings for the different ABS sectors, including real estate, credit cards and autos.

Scorecards

Scorecards

View the Scorecard deals featured in ASR's Scorecard database.

Mortgage Refi Data

Mortgage Refi Data

See results from the Mortgage Banker's Associations Refinance and Purchase Indexes as well as the weekly mortgage rates surveyed by Freddie Mac.