Strategic Rewrite of U.S. Securitization Studied

As credit markets are critically dependent on asset securitization, FedFin now turns to the risk-retention requirements in Title IX. As noted, we will provide clients with immediate assessments of key provisions, following up our report earlier this week on sweeping new capital requirements (see Client Report CAPITAL162). We will do these initial assessments and then turn to full analysis of each title of the Dodd-Frank Act. The most significant change in the final law to earlier text (see Client Reports in the ABS series) adds a wholesale exemption for “qualified” residential mortgages, giving regulators authority to craft this according to stipulated criteria. Since FHA loans are exempt from risk retention, how the private-sector/GSE exemption is defined will have significant impact on the long-term balance between federal and private issuers, mortgage insurers and loan originators.

ABS16.pdf