.jpg)
In two comment letters filed yesterday, SIFMA expressed its support for regulatory changes in disclosure of repurchase requests and due diligence proposed by the Securities and Exchange Commission (SEC) under the Dodd-Frank Act which will help revive the securitization market by enhancing transparency and rebuilding investor confidence. SIFMA is particularly supportive of proposed changes which will allow investors to make more informed investment decisions and facilitate the recovery of the securitization markets. In SIFMA’s view, however, some proposals could have unintended consequences that will impede the renewal of securitization activity and therefore economic recovery.
“Our comments on these important issues reflect SIFMA’s goal of restoring capital flows to the securitization markets and increasing the availability of affordable credit to American consumers and small businesses. Improving disclosure regarding repurchase requests and due diligence in asset-backed securities is an important step towards restoring a functioning, thriving, liquid and efficient securitization marketplace,” said Richard Dorfman, managing director and head of SIFMA’s Securitization Group. “We urge the SEC to very carefully consider the implications of new regulations to ensure that the new rules support the long term health of this essential tool for our economy.”
In its comment letter focused on due diligence, SIFMA:
- Supports the proposal to require an issuer of registered asset-backed securities or a third party designated by the issuer to perform a review of the assets underlying the securitized pool.
- Recommends a third party conducting a due diligence review not be named an “expert,” as the liability associated with that designation could limit the availability of these types of services, thus denying the securitization industry’s access to the valuable due diligence provided by these types of firms.
- Expresses its belief that it would be unwise for the SEC to delineate granular minimum standards for diligence reviews, given the complexity of this task and the short timeframe allotted in Dodd-Frank for rule promulgation, and asks the SEC to observe disclosure practices before making a determination that granular standards should be mandated.
- Recommends the proposal exclude asset-backed commercial paper conduits as well as foreign offered asset-backed securities.
In its comment letter focused on disclosure relating to fulfilled and unfulfilled repurchase requests, SIFMA:
- Recommends that rules requiring disclosure of repurchase requests apply to outstanding asset-backed securities of a single class, and that asset-backed commercial paper, collateralized debt obligations, resecuritizations and foreign offered asset-backed securities be excluded from the proposed rule.
- Notes that the definition of securitizer should be applied solely to Fannie Mae or Freddie Mac and not the financial institution transferring loans to Fannie Mae or Freddie Mac.
Suggests that any retrospective disclosure requirement should not carry with it strict liability, given the challenges that sponsors and trustees will face in gathering historic data for which there may not have been retention and reporting policies and procedures in place. - Requests a definition of what constitutes a “repurchase request”.
- Recommends quarterly filing of repurchase request disclosure forms, with Regulation AB disclosures presented in the same format as non-Regulation AB disclosures.
