The final US risk retention rules will soon apply to asset-backed securities with respect to all asset classes other than residential mortgage-backed securitisations (to which they already apply). In light of this, it is timely to examine the exclusion which applies to certain non-US securitisation transactions and the basic US risk retention requirements. Further, some key issues should be considered when determining whether a proposed transaction falls within the 'foreign-related transaction' safe harbour.
The Obama administration's plans for overall regulatory reform of the financial system in response to the ongoing financial crisis would dramatically increase the federal government's role in the capital markets, although changes affecting the securitization markets may be less significant than some had anticipated.
The parties which are blamed the most consistently for the current economic downturn are the three major credit rating agencies. The European Parliament recently approved a new registration and ongoing oversight regime for credit rating agencies active in the European Union. It is hoped that the United States will follow this lead and attempt to reform ratings, rather than remove minimum ratings requirements.
The Federal Reserve's Term Asset-Backed Securities Loan Facility (TALF) has now begun operation. The Treasury Department and the Federal Reserve have announced the schedule for TALF borrowings and published revised terms designed to address concerns that market participants had expressed about the programme.
A joint initiative of the US Department of the Treasury and the Federal Reserve based on the Term Asset-Backed Securities Loan Facility will provide up to $1 trillion of financing for asset-backed securities and commercial mortgage-backed securities. The new Consumer and Business Lending Initiative will provide non-recourse loans secured by asset-backed securities.
The Department of Education has established the first federally guaranteed student loan asset-backed commercial paper conduit programme. Under the programme, beneficial owners of fully disbursed FFELP Stafford and PLUS Loans, for which the first disbursement was made between certain dates, may sell such eligible student loans to their newly created, bankruptcy-remote special purpose entities.
The Federal Reserve has released revised terms of the Term Asset-Backed Securities Loan Facility (TALF) that extend the term of TALF loans from one year to three years, make financing available to all eligible borrowers and clarify the collateral eligibility requirements. The new credit facility is expected to begin operation in February 2009.
The US Securities and Exchange Commission has voted to require any nationally recognized statistical rating organizations (NRSROs) providing ratings of structured finance products that are paid for by the issuer, sponsor or underwriter to obtain a commitment from the arrangers of the offering to make available to other NRSROs all information provided for the purpose of determining initial credit ratings or monitoring those ratings.
The Federal Reserve will make up to $800 billion available to finance certain asset-backed securities (ABS) and to purchase government agency mortgage-backed securities and debt of certain government-sponsored enterprises under programmes announced recently. The ABS facility will be backed by $20 billion of credit protection provided by the US Treasury Department under the Troubled Asset Relief Programme.
US Treasury Secretary Henry Paulson recently released a statement asserting that supporting the markets for “securitizing credit outside of the banking system” will be among the highest priorities for use of the funds remaining to be allocated under the Troubled Asset Relief Programme.
The widely publicized housing legislation recently signed by President Bush in response to the continuing high rates of default and foreclosure on residential mortgage loans includes various provisions that will affect the mortgage-backed securities markets and investors in outstanding mortgage-backed securities. This update summarizes certain aspects of the legislation.
Interim Assistant Secretary for Financial Stability Neel Kashkari has announced "tremendous progress" on the mortgage loan and mortgage-backed securities purchase programmes. Among other things, the Treasury Department is working with the Bank of New York Mellon to identify which mortgage-backed securities to purchase and to design auction procedures.
The Securities and Exchange Commission has adopted a new set of rules for asset-backed securities (ABS) under the Securities Act of 1933 and the Securities Exchange Act of 1934. The rules will regulate ABS in four areas: Securities Act registration; disclosure; communications during the offering process; and ongoing reporting requirements.
The Securities and Exchange Commission recently proposed a comprehensive set of rules for asset-backed securities (ABS). The rules aim to regulate ABS in four areas: Securities Act registration, disclosure under the new Regulation AB, communications during the offering process, and ongoing reporting requirements under the Exchange Act.
The Federal Bank and thrift regulatory agencies have amended their risk-based capital standards by removing the July 1 2004 sunset date from the existing treatment which has allowed banking organizations to exclude from their risk-weighted assets the assets of any asset-backed commercial paper conduit programmes they sponsor which are consolidated on their balance sheets.