Securitization

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Last Thursday, the U.S. Commodity Futures Trading Commission (“CFTC”) responded to ASF’s and SIFMA’s requests for relief from the new CFTC rules which implemented certain Dodd-Frank amendments that brought swaps within the purview of the CFTC.  The new rules, which took effect on October 12, 2012, threatened to regulate many securitization vehicles as commodity pools even though these vehicles typically only use swaps for hedging or risk management purposes.  The crux of the issue, and possibly the unintended consequence of the new CFTC rules, is that, without relief, sponsors and advisors (such as depositors, trustees, collateral managers and servicers) would be subject to CFTC registration and regulation as commodity pool operators and/or commodity trading advisors. Continue Reading Unintended Consequences Avoided? CFTC Provides Relief for Certain Securitization Vehicles

Last week, the Federal Housing Finance Agency (“FHFA”) has joined the chorus of opponents, expressing “significant concerns about the use of eminent domain to revise existing financial contracts”.  We at CrunchedCredit have recently covered the eminent domain proposals being considered by Chicago and San Bernardino County.
 Continue Reading Eminent Domain Proposals: Federal Housing Finance Agency Concerned

Sometimes a bank just has to sell assets. For many banks confronting capital shortfalls, this is one of those times. Last week, we wrote generally about the "Investing in Distressed Bank Assets Conference" in London. Great conference. Marquee headline: EU Banks Will Sell Risky Assets. Time for a deeper dive into issues confronted by the sellers. 

So, if you want to sell a big pile of assets (steaming or otherwise), what do you do? You can certainly hire one of the well-known brokers (er, I mean loan sale advisors) in the market and tell them to have their way with you. They will do some level of loan file organization; produce some type of tape; produce a book (pretty pictures); and set up a war room. They will run a public auction process. They will jawbone the bidders.  Do they do a really good job? Read on. Is this the only option? No.Continue Reading Time to Sell the Silver

Recently, the Wall Street Journal highlighted the arrival of “bad loan securities.” If this is a trend, and I both hope and think it is, we clearly have to get a better deal name for these than “Insert Bank Name”, Bad Loan Securities 2012-1. Securitization of less than ideal conduit product has been with us since the birth of securitization, but reached its apogee in the RTC series, for non-performing loans, in the early to mid 1990s. That transaction architecture is being revived, and it’s about time. Both Fitch and DBRS have published criteria, or at least guidance and the other agencies are beavering away, busy working with bankers to come up with workable ratings technology.Continue Reading The Return of the Liquidating Trust

While wrapping your holiday presents, don’t forget about another regulatory gift that springs to life as of the new year: Rule 193 and the accompanying joys of Items 1111(a)(7) and 1111(a)(8) of Reg AB. The final rules for Dodd-Frank’s Section 945 – which we at CrunchedCredit.com have addressed before – are almost a year old and their effects are coming to a public transaction near you by requiring “issuers” (1) to perform (or have a third party perform) a due diligence review of a deal’s underlying assets with the aim of reasonably assuring that disclosure included in the related offering documents is materially accurate and (2) to disclose in offering documents the nature of the review, any findings or conclusions of the review and any details regarding assets that deviate from the disclosed underwriting criteria. And this is a gift that keeps on giving.Continue Reading A Dodd-Frank Holiday Reminder: Ribbons, Reindeer and Rule 193

Not only is football back, but so is Reg AB II. Just as enduring as our love of tailgating and touchdowns is our love of transparency in the capital markets. On the heels of yet another Reg AB comment deadline (see re-proposed rule here (pdf)) now is a good time to check the score. Dechert continues to participate in committee (and subcommittee) discussions with industry specialists and we were happy to serve as nose tackle for the drafting of CREFC’s response/comment letter (see CREFC comment letter here (pdf)). So where do we stand with shelf registration eligibility requirements now that Dodd-Frank and its related regulations have addressed some of the issues included in the second round of Regulation AB from April 2010 (i.e., Reg AB II)?

There is still plenty to talk about with respect to Reg AB II, but some issues are now being dealt with elsewhere. Risk retention was addressed by March 2011’s Dodd-Frank rules and on-going ’34 Act reporting by ABS issuers was addressed by Dodd-Frank’s Section 942(a) and Rule 15Ga-1. Both of those issues have been removed from the scope of Reg AB II. The previous discussion concerning confirmation of reps and warranties has evolved, as detailed below, into a discussion about the role of a credit risk manager and procedures related to repurchase dispute resolution. At least one thing that is still clear: credit ratings are to be eliminated from the shelf eligibility test.Continue Reading Reg AB II Revisited: Fourth and Goal

My team and I have spent the better part of the past eight weeks dealing with Irish loans and other portfolios of…stuff. While the conduit market was imploding, pipelines were being aggressively repriced and loan production was shifting into a very low gear, there has been a full scale feeding frenzy for portfolios of seasoned loans. While new loan originations were being dragged through the knot hole of torturous and ultimately paralytic analysis, millions of dollars were spent in high speed car chases for billions of dollars of seasoned loans in awkward, brief and brutal auctions.

Cognitive dissonance anyone? These are alternate universes. In the Ordinary Course Loan Origination Universe, every proposal suffers the death of a thousand cuts: “OK, maybe it’s a pretty good loan but I need to really understand what happens if the anchor tenant leaves, the president of the management company gets arrested and an asteroid hits Ohio. What exactly happens in the cash flow?”  In the Alternate "Bid ‘Em Up Universe", crappy reps, document defects and weird deal features? Fine! Win the bid!
 Continue Reading And the Momentum is Going Which Way?