May 10, 2019 | Issue 282
SFIG News
SFIG Hosts "Housing Finance 101" Hill Briefing in Partnership with MBA

On Thursday May 2, 2019, SFIG hosted an educational briefing for Capitol Hill staffers in partnership with the Mortgage Bankers Association (MBA). SFIG’s President and CEO, Michael Bright, was a featured presenter alongside Dr. Michael Fratantoni, Chief Economist and Senior Vice President for MBA. The briefing was sponsored by Rep. French Hill (R, AR-2) and attended by bipartisan staff from the House and Senate. Mr. Bright’s remarks focused on the role of securitization in today’s economy, past legislative reform efforts, and why there is a renewed focus on housing finance reform from policymakers in both Congress and the Administration.
SFIG Announces Formation of the European Securitization Regulation Task Force
 
This new task force will focus on the European Securitization Regulations that became effective this past January, consolidating a variety of existing securitization laws and imposing due diligence, transparency, and risk retention requirements on a broader scope of institutional investors. This task force is open to all SFIG members and will promote member education while providing a forum to discuss and assess the impact of these new requirements across the securitization industry.
 
Please contact Hunter Hamrick if you would like to be added to this task force.
SFIG Hosts Investor Roundtable on LIBOR Transition

Last Friday, May 3, SFIG convened a roundtable for investors to discuss key topics related to LIBOR benchmark replacement and transition. The main topics addressed included the extent and nature of fallback language in new deals, the importance of consistent approaches across asset classes and the derivatives market, and potential strategies with which to address legacy deals.

Participants noted the importance of engaging across SFIG membership to identify areas where consensus on proposed solutions and recommendations can be achieved. If you would like to join the SFIG LIBOR Task Force, please contact Hunter Hamrick.
Next Week in Washington
House Committee on Financial Services
Wednesday, May 15
10:00 a.m. EST
  • Subcommittee on Investor Protection, Entrepreneurship and Capital Markets: “Promoting Economic Growth: A Review of Proposals to Strengthen the Rights and Protections for Workers.”
2:00 p.m. EST
  • Subcommittee on National Security, International Development and Monetary Policy: “Assessing the Use of Sanctions in Addressing National Security and Foreign Policy Challenges.”

Thursday, May 16
10:00 a.m. EST
  • Full Committee: “Oversight of Prudential Regulators: Ensuring the Safety, Soundness and Accountability of Megabanks and Other Depository Institutions.”

Senate Committee on Banking, Housing, and Urban Affairs
Wednesday, May 15
9:30 a.m. EST
  • Full Committee: "Oversight of Financial Regulators"
What We're Watching
Fannie and Freddie could be released without Congressional Approval

Newly confirmed FHFA Director Mark Calabria stated in an interview there was a possibility that Fannie Mae and Freddie Mac (GSEs) could be freed from government control even if Congress doesn’t pass major housing-finance reform. However, Director Calabria said that lawmakers would have “at least an entire Congress” to propose and pass housing finance reform. Some industry experts have expressed concern with this approach, stating that simply releasing the GSEs from conservatorship without congressional action could allow them to revert back to their pre-crisis state without the fundamental reforms necessary to prevent them from engaging in the kinds of activities that led to their bailout during the financial crisis. 
Bloomberg Editorial: We Should Leave Fannie and Freddie Alone

Bloomberg published an editorial piece recommending that Congress and the Trump administration slow their attempts to alter dramatically Fannie Mae and Freddie Mac. Bloomberg argues that while the current relationship between the government and housing GSEs is not perfect, a swift and disruptive change could do more harm than good. They go on to argue that the current status of the relationship has had its benefits, citing the GSEs’ foray into credit risk transfer transactions and their ability to keep credit flowing in times of economic decline.
Ninth Circuit Rules CFPB’s Structure is Constitutional

On Monday, May 6, the Ninth Circuit Court of Appeals three judge panel unanimously ruled in Consumer Financial Protection Bureau (“CFPB”) v. Seila Law LLC that the CFPB’s single-director-removable-only for-cause structure is constitutional. In addition to rejecting Seila Law’s constitutional challenge, the Ninth Circuit held that the Civil Investigative Demand did not violate the CFPA’s practice of law exclusion. Two other cases involving a challenge to the CFPB’s constitutionality are currently pending in the Second and Fifth Circuit Courts, either of which could create a circuit split. In related CFPB news, Director Kathy Kraninger has been facing criticism for her stated intent to refocus the CFPB on supervision instead of enforcement. Skeptics such as the Consumer Federation of America are concerned that this approach could result in consumer harm going unaddressed.
House Financial Services Committee Approves Creation of
FinTech and AI Task Forces 

On Thursday, May 9, the House Financial Services Committee approved the creation of a FinTech Task Force and an Artificial Intelligence (“AI”) Task Force by voice vote. Rep. Stephen Lynch (D, MA-8) will chair the FinTech Task Force which will examine the current legal framework for FinTech, how it is used in lending and how consumers engage with FinTech. Rep. Bill Foster (D, IL-11) will chair the AI Task Force which will examine the impact of automation and machine learning and how companies and consumers can use AI to improve their lives. Rep. French Hill (R, AR-2) will serve as Ranking Member of both Task Forces. 
Ginnie Mae Seeks Input for VA Loan Rules; Several VA Lenders Subpoenaed

Last week, Ginnie Mae announced that it would be seeking input for potential changes for its rules on VA loans. Specifically, Ginnie Mae is considering adopting rules that would exclude or restrict some loans with prepayment speeds uncorrelated with economic conditions from participating in the Ginnie Mae II Multi Issuer Program. The proposal ( found here ) comes after Ginnie Mae and other federal agencies completed a year-and-a-half long investigation and found that certain lenders, particularly VA lenders, were marketing to borrowers and making loans that had no economic benefit to the borrower. Recently, The Department of Veterans Affairs Office of Inspector General and the US Attorney in the Eastern District of New York issued subpoenas to several mortgage lenders stemming from the results of the investigation.  

SFIG will be responding to the above-mentioned RFI published by Ginnie Mae. If you would like to participate or provide input to SFIG’s response, please contact Hunter.Hamrick@SFIndustry.org
Timothy Bowler, the Man Who Wants to Fix LIBOR

While most regulators agree that LIBOR is not a reliable rate and needs to be replaced, one man is arguing that we should fix it. Timothy Bowler, president of the ICE Benchmark Administration at the Intercontinental Exchange, is arguing that rather than ditch LIBOR, we should improve it. While the current front runner to replace LIBOR in the U.S. is the secured overnight financing rate (SOFR), Mr. Bowler argues that the market needs both benchmark rates with LIBOR being the benchmark for credit risk and SOFR being the benchmark for interest-rate risk. However, some industry experts are skeptical of Mr. Bowler’s efforts. They argue that utilizing two benchmarks would require contracts to adhere to multiple standards that would make implementation difficult and costly, according to the Wall Street Journal .  
Fed Warns That Risky Corporate Debt is Top Vulnerability for the
US Financial Market

In its biannual financial stability report, the Federal Reserve found that risky corporate debt poses one of the most significant risks to the US financial system. The report found that loans to large companies with outstanding debts grew by 20% since last year to $1.1 trillion. The Fed notes that while defaults on these loans are low, an economic slowdown could change that. The report also found that trade tensions and Brexit negotiations could severely test the stability of the US financial market. 
Smaller Mortgages are Getting More Difficult to Obtain

Some homebuyers from low and middle-income brackets are finding it harder to obtain mortgages because the loans they apply for are too small, according to the Wall Street Journal. Data from ATTOM Data Solutions found that in the last decade mortgages ranging from $10,000 to $70,000 dropped by 38%, mortgages ranging from $70,000 and $150,000 dropped by 26%, and mortgages $150,000 and above rose by 65%. Some housing experts say that these smaller mortgages are becoming harder to come by because lenders have difficulty making a profit from these loans. “The whole system incentivizes high-balance loans.” says SFIG President & CEO, Michael Bright. 
SFIG Look Ahead
Ginnie Mae RFI Task Force
Tuesday, May 14
11:00 a.m. - 12:00 p.m. EST
Credit Card Issuer Committee
Monthly Call
Thursday, May 16
10:00 a.m. - 11:00 a.m. EST
SFIG Events
SFIG Canada 2019
May 22-23, 2019
Fairmont Royal York

Join us for the WiS Networking Luncheon , Industry Dinner, and Industry Dinner After-Party.

SFIG Legal Forum 2019
The SFIG Legal Forum 2019 , hosted by Mayer Brown LLP, on Tuesday, June 4, from 8:00 a.m. to 5:10 p.m. EST. This event is offered exclusively to SFIG member firms.

Sponsorship Opportunities
Now Available
SFIG Residential Mortgage Finance Symposium

The Structured Finance Industry Group’s 2019 Residential Mortgage Finance Symposium will once again be held at the Conrad New York, November 4-5, 2019. The Symposium will include top industry speakers, market-driven content, and a diverse array of industry engagement opportunities.

SFIG invites you to join us at the PurpleStride   event to end pancreatic cancer in honor of Reggie Imamura, Founding SFIG Chair and a true champion for the industry. For the fourth year in a row, Natalie and Sophie Imamura, Reggie's daughters, are rallying support for ending pancreatic cancer by walking in their dad's honor.

We encourage all to come, walk, run, cheer, or  donate to help find a cure.

Saturday, June 8, 2018
8:00 a.m. - 10:00 a.m.