Dodd-Frank

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Two and a half years after Dodd-Frank and almost two years after the first hurriedly issued proposed rules, the six agencies (Department of Housing and Urban Development, Federal Deposit Insurance Corp., Federal Housing Finance Agency, Federal Reserve, Office of the Comptroller of the Currency, and the U.S. Securities and Exchange Commission) charged with creating risk retention architecture for commercial mortgage securitization have yet to issue a final rule, interim final rule or even a new proposed rule. Since Dodd-Frank provides a two year transition period after publication of a final Rule (or perhaps interim final rules), we might think, no Rule, no risk retention; all is good, no worries. Bad way to think about this. Something is coming out soon. It will be important. It may start affecting our business now. I don’t think we can or should be complacent. More on this later.

What we’re hearing from the panjandrums of the regulatory community is that the horrific concept known as premium capture cash reserve account (PCCRA) is finally cold and dead (although until I see sunlight shining in its grave and a stake in its heart, I won’t be sure), and that the regulation writing committee is settling on an alternative, focusing on risk retention to be satisfied through a B-piece buyer holding a horizontal 5% first-loss strip (the B piece fix was, of course, added to the statute by amendment by Senator Crapo, bless his heart). On this topic the statute said:Continue Reading It’s Time to Revisit Risk Retention

Dechert’s securitization team is looking forward to the American Securitization Forum 2013 (“ASF 2013”) conference starting this Sunday, as it is expected to be once again the largest capital markets conference in the world. ASF 2013 is expecting over 4,500 participants who will all convene at the Aria Hotel and Convention Center in fabulous Las Vegas.Continue Reading ASF 2013 (“Viva Las Vegas”)

The Loews Hotel buzzed with optimism on the first day of the CREFC January conference, as over 1,300 attendees descended on South Beach.  After catching up with many friends, the Monday morning session began with lively meetings of the Agency Investors Forum, the High Yield and Investment Forum, the Issuers Forum and the Portfolio Lenders Forum.  Panelists at the forums expressed a general sense of optimism for 2013 and expect the general market trends of 2012 to continue into 2013.Continue Reading Day 1: CREFC Sizzles on South Beach

The election’s over and elections matter we’re told, albeit most of the denizens of Washington seem to have remained in their seats. The fiscal cliff awaits. We wait, with various levels of trepidation, for a workable compromise or, perhaps, to find out that life goes on regardless of what our elected leaders do. A bit of leadership, perhaps? One hopes that the Congress and the Senate, so mad at each other and so dug in on many issues, will, in the New Year, strive to find areas where compromise and commonality can be found. Indeed, whether the noise about principles and non-negotiable positions has content or is merely the expelling of political gasses, it’s pretty clear both parties better find some place to start agreeing and actually do something for the country if they really want to continue to be honored with the right to engage in public service; e.g., keep their rumps in their elected seats.Continue Reading A Christmas Wish: Fix Dodd-Frank (Just a Little)

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

The Consumer Financial Protection Bureau (the “CFPB”) is currently charged with defining a “Qualified Mortgage” (a “QM”). The federal banking agencies, the SEC, the FHFA and the Department of HUD are jointly charged with defining a “Qualified Residential Mortgage” (a “QRM”), and the QRM definition cannot be any broader than the QM definition. A narrowly…

Seven of our colleagues in Dechert’s active CLO group represented the firm at the first annual IMN CLO and Leveraged Loan Conference in New York a few weeks ago. Strong interest in the collateralized loan obligation technology meant a capacity crowd of more than 750 managers, arrangers and investors, often leaving panel discussions with standing room only.

As participants reviewed CLO performance over the past five years, the theme emerged that CLOs weathered the crisis well compared to other structured finance vehicles. The CLO technology performed as advertised: protecting senior investors and amortizing senior notes during periods when coverage tests triggered.Continue Reading First Annual IMN CLO and Leveraged Loan Conference Update

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