The expiration in January of the Securities and Exchange Commission's no-action letter on Reg 436(g) is a looming event the securitization industry needs to keep a close eye on, Tom Deutsch, the executive director of the American Securitization Forum, told TS Reporter Amelia Granger in the inaugural podcast of "Tranche Talk." Deutsch gave a rundown of regulatory issues facing the securitization market and its landscape of unprecedented change. The conversation ranged from grappling with the first post-Dodd-Frank Act rules to overlapping proposals from a myriad of regulators. Below are highlights from the conversation. Please play podcast to hear the complete conversation:
On the First Dodd-Frank Rules:
"I think [the first Dodd-Frank rules] have been pretty expansive, and certainly in some of the comments that we've already provided back to the [Securities and Exchange Commission]--and in other comments that we'll be providing Nov. 15--we have said they are overbroad to an extent. And they may be going beyond the legislative intent that Congress was seeking to mandate."
On FDIC And Overlapping Regs:
"The [Federal Deposit Insurance Corporation] chose to front-run [the Dodd-Frank mandated] legislative process and implemented risk retention regulation to start as of Jan. 1. I think that's going to cause significant duplication of effort by the insured depository institutions, or worse--and what I think is more likely--is that the depository institutions will just forgo securitization straight from their balance sheets and just hold those loans, or potentially sell them to other third parties, who may ultimately securitize them."
On SEC's Reg 436(g) No-Action Letter Expiring:
"Issuance stopped overnight because of the passage of Dodd-Frank and the repeal of rule 436(g). So we certainly applauded the SEC for making the temporary accommodation until late January not to effectively enforce Regulation AB rules 1103 and 1120. The key question, obviously, now, is what do they intend to do after Jan. 24, 2011. The answer so far has been silence on what their proposed plans are."
On Ratings Policy Being Made On Two Fronts:
"It is humorous that we're having a significant debate about removal of ratings for regulatory capital--the comment deadline on that just passed last week--yet at the same time the SEC still has on its books, and has not yet proposed to redact from its books, mandates to include ratings as part of registration statements and prospectuses. So we have policy-making occurring on two different fronts and effectively working against each other, in theory."
On GSE Reform:
"I think 2010 was the year of much ado about nothing in [government-sponsored enterprise] reform...but in anticipation of the House flipping to the Republican side, I think you'll have a much stronger desire to push forward with GSE reform."
--Amelia Granger